Explainer: Why Suzlon Energy shares surged 5% in early trading

Shares of Suzlon Energy gained 5% in early trading on Wednesday after Morgan Stanley reaffirmed an “overweight” rating on the company, setting a target price of 73.40 rupees per share.

The target is about 11% higher than Suzlon’s closing share price on Tuesday.

The rise in Suzlon’s share price came on the heels of the company’s announcement that it had signed definitive agreements to acquire a 76% stake in Renom Energy Services from Sanjay Ghodawat Group (SGG).

Renom is India’s largest multi-brand Operations and Maintenance Services (MBOMS) provider with assets under management of 1,782 MW in wind, 148 MW in solar and 572 MW in BOP.

Following the announcement, Suzlon’s share value rose to Rs 69.45 on the BSE.

Morgan Stanley stressed that the implied transaction valuation of four times the selling price is more attractive compared to the listed company Suzlon.

Other financial analysts have set different targets for Suzlon: JM Financial at Rs 71, Geojit Financial Services at Rs 73, Anand Rathi Shares & Stock Brokers at Rs 68 and Nuvama Institutional Equities at Rs 64.

The acquisition of Renom by Suzlon will be done in two tranches. The first tranche comprises acquisition of 51% stake for Rs 400 crore, while the second tranche comprises additional 25% stake acquired over 18 months for Rs 260 crore.

The finalization of this transaction is subject to the fulfillment of certain conditions.

Suzlon Energy said the strategic acquisition will unlock Renom’s potential and position it as a leading independent service provider (ISP) for multi-brand renewable energy assets.

Girish Tanti, Vice President, Suzlon Group, explained that the step is in line with India’s target of achieving 500 GW of renewable energy installed capacity by 2030.

He noted that Renom’s expertise in servicing various renewable technologies and turbines will be crucial to Suzlon’s development strategy.

JP Chalasani, CEO, Suzlon Group, added that the acquisition will strengthen Suzlon’s services business, which has been a key enabler of the energy transformation.

Suzlon Services focuses on Suzlon turbines and Renom on third-party assets. Its goal is to provide comprehensive O&M services to the Indian renewable energy sector.

Chalasani also expressed confidence in Renom’s potential to deliver top-notch customer service as a standalone internet service provider.