Implementing the Balanced Score Card

Balanced Score Card Final Project

S itted : ro 4 (A hilasha, Adwait, Ankit, B. Prathik, Devika, Misha, Vikrant, Vivek)

WIND ENERGY
The Earth is unevenly heated by the sun, such that the poles receive less energy from the sun than the equator; along with this, dry land heats up (and cools down) more quickly than the seas do. The differential heating drives a global atmospheric convection system reaching from the Earth's surface to the stratosphere which acts as a virtual ceiling. Most of the energy stored in these wind movements can be found at high altitudes where continuous wind speeds of over 160 km/h (99 mph) occur. Eventually, the wind energy is converted through friction into diffuse heat throughout the Earth's surface and the atmosphere. The total amount of economically extractable power available from the wind is considerably more than present human power use from all sources. An estimated 72 TW of wind power on the Earth potentially can be commercially viable, compared to about 15 TW average global power consumption from all sources in 2005. Not all the energy of the wind flowing past a given point can be recovered.

PORTERS FIVE FORCE ANALYSIS

The Intensity of Competitive Rivalry Medium Although the market is dominated by two players but the extent of competitive rivalry can be termed as medium because there is a scope for foreign players. Bargaining Power of Suppliers Medium High bargaining power of suppliers can be attributed to multiple requirement of number of components, which are either sourced from open market or imported. However, this issue has been resolved due to widespread vertical integration. Yet some components have long delivery time which gives medium bargaining power to suppliers. Bargaining Power of Buyers Low Since its a relatively new sector still in the development stage of the life cycle so there can be number of cases where supplier governs the terms when compared to the buyers. The Threat of Substitute Product Low Since wind power is one of the cheapest sources of energy so the threat of substitutes is relatively low

WIND POWER: GLOBAL GROWTH

FACTORS IN FAVOUR OF WIND ENERGY:

INDUSTRY GROWTH

SUZLON
Conceived in 1995 with just 20 people, Suzlon is now a leading wind power company with over 14,000 people in 21 countries Operations across the Americas, Asia, Australia and Europe Fully integrated supply chain with manufacturing facilities in three continents Sophisticated R&D capabilities in Denmark, Germany, India and The Netherlands Market leader in Asia and 3rd largest wind turbine manufacturer in the world, Suzlons Market Share (Combined with REpower) rose to 12.3% thereby making Suzlon 3rd largest wind turbine manufacturing company in the world.

SUZLON AT A GLANCE
Founded: 1995 Headquarters: Pune, India

Presence:
o 21 countries: Australia, Belgium, Brazil, Canada, China, Denmark, Germany, Greece, India, Italy, New Zealand, Nicaragua, Portugal, Romania, Spain, Sri Lanka, The Netherlands, Turkey, Ukraine, UK, USA

Manufacturing:
o India: Maharashtra, Pondicherry, Gujarat, Daman, Padubidri o China: Tianjin o North America: Pipestone, Minnesota R&D: Denmark, Germany, India, Netherlands Product Portfolio: S88-2.1 MW, S82-1.5 MW, S66-1.25 MW, S64-1.25 MW, S52-600 kW Market Share: 9% of the world wind energy market, 3rd largest wind power supplier Employees: 14000+ [23 nationalities] Listing: BSE and NSE (India), part of S&P CNX Nifty Index

HISTORY OF SUZLON
The seeds of the idea that became Suzlon were sown when Mr. Tanti ventured into the textile industry. Faced with soaring power costs, and with infrequent availability of power grid hurting his business hard, he secured two small-capacity wind turbine generators to power his textile business. Mr. Tanti saw the potential of wind power and the global opportunities in the field. Moving quickly, he set forth to acquire the basic technology and expertise to set up Suzlon Energy Limited - Indias first home-grown wind technology company.

Suzlon began with a wind farm project in the Gujarat state of India in 1995 with a capacity of just 3 MW and has, at the end of 2007, supplied over 7,500 MW world over. The company adopted innovation at the very core of its thinking and ethos, starting with the customer friendly End-to-End solution package. Suzlon combined this with another visionary step - full backward integration of the supply chain. Suzlon by this approach has developed comprehensive manufacturing capabilities for all critical components in our wind turbines bringing into play economies of scale, quality control, and assurance of supplies. This paired with the visionary entrepreneurial drive of Tulsi Tanti led Suzlon through an unprecedented expansion. The company seized market leadership in India in 1999 and since then has consistently maintained over 50% market share, installing over 3,000 MW of wind turbine capacity in the country. Looking for growth not just in India, but across the world, Suzlon looked past traditional markets for wind energy, and starting in 2001 entered new and emerging high-growth global markets. Today, Suzlon is a company of over 14,000 people, operations across America, Asia, Australia and Europe, fully integrated manufacturing units on three continents, sophisticated R&D capabilities and market leadership in Asia, ranked the 5th leading wind power equipment manufacturer in 2007 with a global market share of 10.5%.

SWOT ANALYSIS OF SUZLON

The SWOT Analysis of Suzlon Energy is explained below through the four indicators:

STRENGTHS OF SUZLON:
Integrated business model
Suzlon Energy Ltd. Is having an integrated business model that they dont have to go to other suppliers for raw products. They have very good vertical integration for supporting their production activities. So they dont have to be dependent for supplies.

In house technology and design capabilities

They are having enough in-house technology development capabilities as they have skilled employees so that they can design their products of their own. They dont have to go to outsider experts for designing the products.

Market Leadership In India And Global Presence

It is the only company of India which is having a global presence and as it is a market leader it can have benefits of its brand image.

Prudent Acquisitions And Alliances

Suzlon has entered in to very prudent acquisition which is helping it for increasing its main strength of vertical integration as well as provides chance of global expansion also. For example: It has acquired HANSEN which was the worlds second largest manufacturer of gear boxes.

Global Production
As Suzlon has a global presence, it produces the products which can be used globally. Though it is not as technically developed as compared to other global players, but its products can work at global level also.

Pricing Power
As Suzlon is the market leader in India, it can drive the price and others will follow it. But , it is now necessary for it to produce and sell at low cost and the production must be cost effective, because new global players are entering in to the market.

Diversified Product Line

Suzlon is producing each type of wind turbines working in India. It has a wide range of products that has been sufficiently designed to cope with the specific conditions and to that give optimum results.

Sophisticated And Modernized Research And Development Facilities

The presence of integrated R&D ensures that Suzlon is at the forefront of all technology changes helping it along its path of becoming the technology leader.

Highly Qualified And Energetic Work Force

Suzlon has in place various programmes to ensure that its workforce is the most competent and motivated. Some of these initiatives are mentioned later in the report.

WEAKNESSES OF SUZLON
Operational Risk
Suzlon as a market leader dont have that much efficient operation management team. We can say this because there are many complaints of customers regarding their operating staffs who provide after sales service and it is also looking up to some extent in operating the business. So proper implementation of strategies is lacking.

Growth in Assets Diminishing Growth in Profits

Since last few years, Suzlon has focused more on integration. So it has gone for acquisition and backward integration which blocks its investments in assets. Thus its growth rate of profits has declined. So, compared to growth in assets the growth in profits is low which is not favourable for the firm.

Unsupportive Stock Prices

When a companys stock price is more than its book value, it can be considered as a good sign for investors, but currently due to the unfavour market conditions Suzlons stock prices has fallen below the book value, while other competitors share prices has not declined below than their book value.

Unfavourable Ratings
Before sometime, only Moody, a credit rating agency has down-graded Suzlon Energy Limited due its financial weaknesses. They have also found the improper operation management at Suzlon.

Improper Working capital Management

Earlier Suzlon was a financially strong company. But the previous down-turn in the world economy has brought the company in a critical situation. And Suzlon is also facing this problem because of improper working capital management. Many experts also think that Suzlon has paid more for its HANSEN acquisition.

Weak Strategic Financial Management

Suzlon when expanded its business through RE Power, it has signed a contract that Suzlon will pay 65 million Euro in December 2007, 30 million Euro in April 2009 and final payment of 175 million Euro will be paid in May 2009. It can be found out that the cost of acquisition is too high and it has been provided that Suzlon will arrange this payments from external sources as well as from working capital which directly affects companies performance domestically as well as globally. Such lacuna in appropriate and timely decision making in finance is the biggest weakness of Suzlon.

OPPORTUNITIES FOR SUZLON

Environmental Awareness
Now a days environmental awareness has been increased among the population of India. They have started saving energy and trying to reduce pollution. This factor is favourable for the wind power energy as its an option to thermal power, which is also responsible for polluting the environment. So wind energy is having benefit of no pollution as it produces pollution free wind energy. And Suzlon is the market leader in India in this sector which is the backup force for it. Therefore, there is a high growth opportunity for Suzlon in future horizon.

Government Initiatives
As government has also understood the importance of natural resources, the govt. is in favour for wind energy which uses wind and provide pollution free energy. Govt. of India is supporting firms those provide untraditional energy. As a part of this industry suzlon can gain advantage of govt. initiatives. Govt. is also providing tax exemption on their earnings and also providing subsidies for encouraging investment in backward areas of society to generate employment.

Untapped Offshore Market

Till now none of the Indian player other than Suzlon has gone for global expansion. So it can have advantage of covering untapped offshore market as an Indian player. Suzlon is also having strong financial backup compared to its competitors in Indian market.

Steady Growth in Demand

As awareness of wind energy is increasing and people understood the importance of renewable energy sources which is cost effective, this leads to steady growth in demand giving an opportunity to business more.

Vast coastlines of India and low cost

In India we have a vast coastal line which is very supportive to establish wind mills at lower cost. So this can be a favourable factor for this industry as well as will give an ample opportunity to Suzlon to extract more from this natural presence.

THREATES TO SUZLON
Intense Competition
The govt. of India has approved FDI limits up to 74%. This can be a favourable factor for the whole industry, but for Suzlon it is a threat. Though it is a market leader, its technology efficiency is not up to the mark as compared to global giants like VASTAS. So entry of global players will affect Suzlon a lot.

Foreign Exchange Risk

As Suzlon is having a global presence, there is default risk of exchange rate fluctuations. As the exchange rates are fluctuating highly since last couple of years, it has become more risky for Suzlon to do business globally.

Technology Risk
Earlier technology was not become obsolete so fast, but currently technological development is very fast and new technology is been introducing in to the market very fast. So the company has to implement the new developed technology to compete in the market where if is having more corporate customers who generally know the product very well before using it.

Objections to Wind Power

The main objection to wind power is due to other environmental costs. Many wind parks remain shutdown for a part of the year because of bird migration patterns and numerous turbine related bartdeaths. Furthermore, turbines take up lands; though larger turbines produce more power, they also take more land to operate safely and effectively, and since any man-made installation can have adverse effects on terrestrial ecosystems. Hardcore environmentalists may object to the installation of wind parks, lobbing the govt. to look for other sources of energy. Obviously, the oil and coal industries will lobby against govt. subsidization of clean energy sources. Basing on this industry, effective lobbying could greatly reduce the amount of government support given to the wind power industry.

MINISTRY FOR RENEWABLE RESOURCES

The ministry for non-conventional energy resources was revamped to form the more powerful ministry for new and renewable resources in the year 2006. The Ministry of New and Renewable Energy (MNRE) is the nodal Ministry of the Government of India for all matters relating to new and renewable energy. The broad aim of the Ministry is to develop and deploy new and renewable energy for supplementing the energy requirements of the country. India said it will promote the setting up of commercial wind power projects by providing financial incentives. Minister for New and Renewable Energy said that the government will provide concessional import duty for wind electricity generator subsystems, excise duty exemption and 10-year tax holidays on wind power projects. Muttemwar said the government also provides benefits of accelerated depreciation, term loans from the Indian Renewable Energy Department Agency and identification of more potential locations by carrying out wind resource assessment studies.

SUZLON MILESTONES 1995-2008

DATE
10-Apr-95 25-Oct-95

SIGNIFICANCE
Formation of Suzlon Energy Limited Suzlon Energy Ltd enters into a Technical collaboration with Sdwind Energy GmbH, one of the erstwhile dominant players in the German Wind Industry AE Rotor Holding B.V ; The Netherlands becomes operational, a wholly owned subsidiary of Suzlon Energy Limited Formation & commencement of operations of Suzlon Wind Energy Corp , USA a wholly owned subsidiary of Suzlon Energy Limited , India Entry in China: Suzlon Energy Limited opens its Representative office in Beijing. Suzlon Energy Gmbh ; Germany becomes operational, a wholly owned subsidiary of Suzlon Energy Limited, India Formation & commencing of operations of Suzlon Energy Australia Pty Ltd. Australia a wholly owned subsidiary of Suzlon Energy Limited, India Formation of Suzlon Energy A/S , Denmark a wholly owned subsidiary of Suzlon Energy Limited , India Suzlon announces the strategic acquisition of Hansen Transmission International NV, Belgium one of the worlds largest wind energy & industrial gearbox manufacturer through its subsidiary Rotor Holding B.V.Truly trailblazing for the fact that this was the second largest foreign acquisition by an Indian Company. Suzlon makes its maiden foray in Australia by signing the contract to build Australia's largest Wind Farm Project for Australia Gas & Light (AGL) Company through its subsidiary Suzlon Energy Australia Pty Limited SEA). Suzlon commissions its first Wind Turbine Generator (WTG) in China Suzlon purchases 34% of the shares of REpower. Suzlon secures cooperation agreement with Areva on REpower. This acquisition of an important strategic asset would further bolster Suzlon's global expansion plans. Suzlon Wind Energy Corporation, the US-based subsidiary of Suzlon Energy A/S of Denmark signs one of the largest contracts in the history of the company & the US wind Power industry. SWECO extends its contract with PPM Energy ( IBREDROLA Group) for a cumulative order booking of 700MW. Suzlon Energy announced that the company in joint venture with REpower Systems AG, Germany has established a new company,namely Renewable

08-Jun-01 01-Oct-01 26-Sep-03 06-Dec-03

15-Jan-04 31-Aug-04

17-Mar-06

15-May-06 03-Jan-07 01-Jun-07 24-May-07

14-Jun-07

07-Feb-08

Energy Technology Centre GmbH in Hamburg, Germany. 06-Jun-08 Suzlon purchases the shares of AREVA in REpower.

MARKET SHARE OF SUZLON

BUSINESS SPREAD

With the increasing demand and the advantage of being an end-to-end solution provider in its field of activity, Suzlon plans to increase its presence within India, and around the world. It already has a presence in over 40 locations around the world including Australia, China, Europe, India, New Zealand, South Korea and the USA. Suzlon has design and R&D teams and facilities in Germany, India and The Netherlands to retrofit blades for clients. The international sales business of Suzlon is managed out of Aarhus, Denmark, while its global management office is in Amsterdam. Suzlon Rotor Corporation in 2006 began producing the blades in Pipestone, Minnesota in the United States. Among its clients is Wind Capital Group. In the year 2006, Suzlon reached a definitive agreement for acquisition of Belgium firm Hansen Transmissions, specializing in gearboxes for wind turbines, for $565 million. In 2007, the company purchased a controlling stake in Germany's REpower which valued the firm at US$ 1.6 billion. In June 2007, Suzlon had signed a contract with Edison Mission Energy (EME) of US for delivery of 150 wind turbines of 2.1 MW in 2008 and a similar volume to be delivered in 2009. EME had an option not to purchase the 150 turbines due to be delivered in 2009, which it has chosen to exercise.
In November 2009, the company decided to sell 35% stake of Hansen through placing new shares. It appointed Bank of America Merrill Lynch and Morgan Stanley as the managers and book runners for the same.

SUZLON AND ITS SUBSIDIARIES:

STRONG HISTORICAL MARKETGROWTH:

ROBUST GROWTH EXPECTATION

FINANCIAL ANALYSIS
Stock Details
BSE Code NSE Code Market Cap (Rs. Cr.) Free Float (%) 52- week High/Low Avg. volume NSE Face Value Shares o/s (No.) Beta 532667 SUZLON 19,026.2 34.11% 460/125 74,62,299 2 149.70 crs 1.14

Key Drivers for Suzlon

Strong Order Book Position with 16,491 Crs. of orders to be executed over the next two years Strong industry growth prospects to drive volume demand going forward Strategic acquisitions to help enter high growth markets and get control over the supply chain Significant capital expenditure plans to drive top line growth going forward

Increasing level of backward integration to help boost volume growth as well as margin expansion going forward

Suzlon is expected to report a CAGR of 38.5% during FY08 to FY12E in net sales on the back drop of strong order book position and significant expansion plans of the company. These coupled with unprecedented demand for wind energy will drive growth for the company going forward. We expect Suzlon to report net profit CAGR of 54.7% during FY08 to FY12E. At CMP of Rs. 138.7 the stock is trading at 13.0X and 8.6X its FY 09E and FY 10E diluted earnings. At current levels the stock looks undervalued and holds strong potential for upside.

Future of Wind Power Sector

Wind energy capacity has been expanding rapidly over the years. In 2007, over 20,000 MW of wind turbines were installed registering a growth of 27% y-o-y. Furthermore, the top five countries in installed capacity are Germany (22,300 MW), the US (16,800 MW), Spain (15,100 MW), India (7,096 MW) and China (6,100 MW). Germany alone accounts for around 24% of the total world installed capacity. In terms of new installed capacity in 2007, the US continued to lead with 5,244 MW, followed by Spain (3,522 MW), India (1,730 MW), Germany (1,667 MW), China (3,449 MW) and France (888 MW). The global wind market witnessed investment of approximately US$ 37 bn in 2007 in new wind generation equipment. Going forward, according to Global Wind Energy Council (GWEC) the global wind market is expected to grow by over 155% from current 94.1 GW to reach 240 GW of total installed capacity by 2012. This would represent an addition of 146 GW in 5 years, requiring investment of over 180 bn. The electricity produced by wind energy will reach over 500 TWh in 2012 (up from 200 TWh in 2007), accounting for around 3% of global electricity production (up from just over 1% in 2007).

We expect the company to witness robust top line and earnings growth going forward. We believe with the ongoing capacity expansion and expected strong demand trend for wind power will drive growth going forward. Furthermore, with the planned backward integration by the company we expect the company to witness margin improvement going forward. However, with the consolidation of RE Power we expect the margins to come down in FY 09. We expect, Suzlon to report a top line CAGR of 38.5% from FY 08 to FY 12. Whereas we expect EBITDA to grow at a CAGR of 40.7% between FY08 to FY12 (primarily due to consolidation of RE Power). We expect EBITDA margins to drop to 14.4% in FY 09 from 16.5% in FY 08. We expect net profit after accounting for minority interest to witness a CAGR growth of 54.7% between FY 08 to FY 12.

Recent Developments
On September 27th 2008, Suzlon has approved raising Rs. 1,800 crs through a rights issue. The funds are raised to finance the acquisition of the additional stake of 22.48% the company has bought in RE Power for approximately 270 mn. The company expects to dilute approximately 7-8% of equity through the issue. IDFC Private Equity has made an investment of Rs 400 Crores for a 17.1% stake in SE Forge Ltd, a wholly owned subsidiary of Suzlon. The company has a 120,000 MT foundry unit in Coimbatore and 42,000 rings per annum. Ringrolling forging facility in Vadodara. The company intends to use the equity investment by IDFC PE to fund these capacities.

PREVIOUS YEARS FINANCIAL PERFORMANCE

S.No. Performance Items 1 2 3 4 5 Total Income Profit After Tax Net Worth Total Asset Dividend Payout 03-04 875 145 388 1009 24.05 04-05 1966 365 904 2088 35 05-06 3915 760 2735 4901 144 06-07 8082 864 3422 12541 145 07-08 13944 1030 8101 26390 150

Key Observations
Total Income rising for 5 years- Rose from Rs. 875 Crores to Rs. 13944 Crores PAT rose from Rs. 145 Crores to Rs. 1030 Crores Companys networth increased from Rs 388 Crores to Rs. 8101 Crores Total Assets increased from Rs 1009 Crores to Rs 26390 Crores Dividend payout increasing year after year- rising to 150 Crores from 24 crores

Overall Assessment:

 A good Company Rising Income, Rising Profit Paying decent dividend regularly, but within same range since the last three years A few other indicators:
S.No. 1 2 3 4 5 6 Indicators EBITDA (Gross Turnover %) Net Profit Margin (%) ROCE (%) Gross Profit Margin (%) Operating Profit Margin (%) Net Income to Total Assets (%) 03-04 16.21 13.79 25.71 04-05 23.6 18.81 42.70 05-06 22.53 19.77 35.25 39.4 21 15.5 06-07 16.23 10.82 18.89 40 14.4 9.8 07-08 14.07 7.53 11.77 35.2 11.4 7

Value Addition per rupee of expenditure has decreased from 0.12p in 2007 to 0.08p in 2008.

Ratios
Suzlon Liquidity Current Ratio Quick Ratio Cash Ratio Activity Inventory Turnover Ratio RM Turnover Ratio Recievables (Debtors) Ratio Average Collection Period Payables (creditors) Turnover Ratio Average Payment Period Working Capital Ratio Total Asset Turnover Ratio Fixed Asset Turnover Ratio 84.022007 3.073973 1.55 14.6823 72.40053 1.8611019 1.22 14.020177 74.95784 2.6795235 1.12 12.734419 80.1379 2.9319735 0.7 12.27999 93.118531 -7.9305667 0.53 9.7681593 3.4577259 4.0600751 3.6624 99.661424 4.3441 3.2801111 3.5986013 3.3895793 107.68298 5.0413995 2.9558744 6.4028624 3.0460332 119.82798 4.8694039 3.361136 7.3798639 2.6124229 139.71704 4.5546489 3.540848 4.8542872 1.7929936 203.57016 3.9197354 2.065368 0.9977736 0.1151066 3.3393359 1.7943006 0.2986236 2.1372013 1.0896937 0.1648921 1.8824772 1.2299635 0.2574868 0.931725 0.6280656 0.0269087 Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Capital Turnover Ratio Leverage Debt Equity Ratio Total Debt Ratio Interest Coverage Ratio Prefernce Dividend Coverage Ratio Profitability Gross Profit Ratio Operating Profit Ratio Net Profit Ratio Market Ratio Return On equity Earnings Per Share Dividend Per Share Dividend Payout Ratio Price Earning Ratio Earnings Yield Dividend Yield

1.8732

1.783264

1.378533

0.9411982

0.623402

0.0908635 0.1655042 9.9853379 239.38411

0.0484606 0.07369 16.855612 543.83444

0.0307221 0.0511669 11.762088 707.42667

0.2347403 0.0256735 10.538413 0

0.4160697 0.0188988 1.7544632 0

0.3757895 0.2260099 0.1874358 0.3888572 41.411364 4.5615085 0.1101511 NA NA NA

0.3199515 0.2488266 0.2129388 0.29097 28.507535 5.7086019 0.2002489 9.2607095 0.1079831 0.0216235

0.3253043 0.2252625 0.1953523 0.2857681 36.823102 5.7084774 0.1550243 5.4419641 0.1837572 0.0284868

0.3064165 0.2162714 0.2045693 0.2039363 9.4652136 1.1699247 0.1236026 27.849345 0.0359075 0.0044383

0.3003569 0.1055294 -0.064687 -0.0713142 -3.1320267 0 0 NA NA NA

Ratio Analysis
Liquidity
Current ratio has declined since Fy-07. It fell to .93 in Fy-09. It indicates that the availability of current asset per rupee of current liability has declined from 2.06 Rs in FY-05 to .93 Rs in FY-09. It indicates towards a deteriorating short term solvency position. Hence, the firms ability to pay short term creditors is declining. Furthermore, according to cash and quick ratio one can say that firms ability to pay short term lenders and meet its current liabilities through instruments that can be readily converted into cash has been declining. In FY-09 the availability of quick assets for 1 Rs of current liability has declined from 1.22 Rs to 0.62 Rs. Position with respect to availability of cash to meet current liability has also depleted. In FY-09 for 1 Rs of liability firm only had 0.02 Rs in the form of cash in bank and balance.

Activity
Inventory Turnover of Suzlon has remained steady, indicating that Suzlon has been producing which is sync with its demand. Yet an increase in RM turnover ratio of Y-o-Y basis from Fy-06 to FY-07

indicates inefficient utilization of raw materials. A decline RM turnover ration from 7.37 in FY-08 to 4.85 in FY-09 points towards slack in demand There has been a constant decline in Debtors Ratio from 3.66 in Fy-05 to 1.79 in Fy-09.Hence; it indicates that the time lag between cash to sales has increased. Furthermore, the collection periods have also increased from 99 days to 203 days which further points towards a tight short term liquidity position. Payable ratio has been somewhat stable. Yet a decline in the payable turnover ratio from 4.55 in FY-05 to 3.91 in FY-09 indicates that the firm has granted liberal credit terms. Furthermore, on an average the short term creditors are willing to wait for payments around 80 days in 2008 and 93 days in 2009. The working capital turnover ratio has been declining, indicating that Suzlon is incurring high investments in working capital which is reducing the profitability of the firm. One Rupee of fixed asset has generated sales worth 1.55 Rs in FY-05 and only 0.7 Rs and 0.53Rs in Fy-08 and Fy-09. Furthermore fixed asset turnover ratio and capital employed turnover ratio has also declined which indicates that amount of sales made per rupee of tangible asset and capital employed has reduced which has reduced the profitability of the firm

Leverage
By analyzing Debt-equity ratio and total debt ratio that the ability of shareholders funds to meet debt requirements have declined. Thereby, reducing the safety margin of lenders For 1 rupee of interest payments Suzlon has sufficient amount of EBIT to sustain it. Hence, there is a low probability of defaulting on interest payments.

Profitability
Gross profit ratio reduced from 0.37 in FY-05 to .30 in Fy-09. The decline in the gross profit margin over the period of five years has resulted from soaring raw material prices and firms inability to increase turbine prices due to intense competition The operating profit has remained stable on Y-o-Y basis. However, there was a steep reduction in the operating profit margin as the firm incurred high amount of expenses Net profit had a fluctuating trend. However, it plummeted to -0.06 Rs on account of losses incurred by Suzlon in Fy-09. Thus as on the balance sheet date, the firm is vulnerable to any economic hardships

Market Ratio
Return on equity reveals that the amount of profit accrued on account to total shareholders funds deployed in the firm has declined On Y-o-Y basis the EPS has declined, indicating that profits available to ordinary shareholders have declined. The amount of dividend received by shareholders have increased till FY-07 and it fell to only 1.16 Rs in Y-08 indicating that the amount of dividend received by an individual shareholders has declined. Since Suzlon didnt give dividend till first quarter of 09 so its a matter of concern for an investor. Dividend payout ratio reveals that close to 88% of profits were kept by the firm and rest were distributed

With respect to market value the dividend and earning yield has reported a declining trend. Yet there is significant improvement in the price being paid by the market for each rupee of EPS.

FINANCIAL ESTIMATIONS

SUZLONS VISION

To be the technology leader in the Wind Energy Space To be among the top 3 wind companies in all the key markets of the World To be the global leader in providing profitable end-to-end wind power solutions To be the Stakeholders Choice Company To be the best team and best place to work

Wind energy though based on age old principles, has progressed in technological sophistication to provide cutting edge technology to harness the power of the wind with the maximum efficiency. Suzlon endeavored to develop the best of worlds technology strategy in order to be the technological Leader in the Wind Energy space. Its key focus is on Research & Development and Technology. It is a vertically integrated global player offering comprehensive solutions covering R&D and manufacturing to project delivery, operations and maintainenance capabilities. By having a strategically structured global Supply Chain to serve high growth markets and by leveraging low-cost economies for manufacturing and sourcing, Suzlons vision of being among the top 3 wind companies of the world by having technological leadership in providing end-to-end wind power solution facilitates its mission of contributing to sustainable development of the Wind Energy sector through an integrated product design and manufacturing strategy and also increase the contribution of wind power to meet global energy demand. Despite a growing degree of globalisation, development remains imbalanced and thus unsustainable in terms of demand for resources.The world today faces a combined threat from fast depleting supply of natural resources, including energy and secondly, from the environmental impact of the world's ever increasing consumption of energy and resources. For over three decades, the world has seen a constant increase in energy demands, of which an overwhelming portion is met by polluting fossil fuels. The need to balance environmental preservation and growing energy demand is now greater than ever. Although measures have been initiated to bridle the unfavorable climate change and enhance sustainable energy sources like wind energy, it still remains only a small part of the global energy matrix. Global electricity generation contribution from wind is expected to increase from 0.82% in 2006 to 3.4% in 2030, highlighting the potential this segment offers. The favourable macro-economic trends in terms of increasing awareness on global warming, urgency in the need to increase the share of renewable energy sources in the total energy pie and the mounting pressure on the existing conventional energy sources only strengthens the case for Suzlon's business opportunities. The vision of sustainable development and being the Stakeholders Choice company has made the organization customer-focussed and thus serve the interests of all its stakeholders. Hence this leads to a further extension of its mission to create a better, greener tomorrow for all.

SUZLONS MISSION

To contribute to sustainable development of the Wind Energy sector through an integrated product design and manufacturing strategy To increase the contribution of wind power to meet global energy demand To create a better, greener tomorrow for all

SUZLONS RESULTANT STRATEGY

CURRENT STRATEGY
In this section we would look at the steps initiated at Suzlon to achieve its vision. We would then later see if the strategy is in line with the overall vision of the company and identify the shortcomings. This would help us identify if there is a need of a balanced scorecard in the organization.

To be the best team and place to work at

Suzlon recently was awarded Indias Golden Peacock National Training Award for their philosophy and practices in Learning and Development. In their pursuit to develop leadership bandwidth within the company, they have signed a Memorandum of Understanding (MOU) with the Centre for Creative Leadership and Indian School of Business, Hyderabad to develop their leaders on global practices. Extending their vision of sustainable development, they signed a MOU with TERI University to establish Indias first Post Graduate Programme in Renewable Energy and Management. One of their goals as a company is to be the best employer in wind industry, and in driving towards this goal they conduct an Employee Engagement Survey, to measure engagement levels and to identify areas for improvement to create a more cohesive, integrated global Suzlon family. The company pays special

attention to analysis and action planning using the results. It will also draw up a global action plan to address employee issues.

Suzlon aims to build a world class Excellence Academy which is mandated to build, nurture and continuously enhance the competency of Suzlon. The academy will align the strategic and operational business needs and enable the company to enjoy leadership excellence. There are other initiatives like Training Mondays undertaken to develop managers and human resources in general.

To be a technology leader in the wind industry

Suzlon derives their technological development programme from a close collaboration between their development teams in Germany, the Netherlands, Denmark and India, the Business Units that market and operate wind turbines in all regions of the world, the production units in India, China and USA, suppliers in Europe, America and Asia and Research Centers experienced in wind energy such as Rise in Denmark, Energy Research Centre (ERC) in the Netherlands and FGH Test Systems in Germany. To cope with the increased requirements of the expanding global business and their marquee t-leading vertical integration, Suzlon has been continuously investing in expanding its development facilities. They now have over 500 specialists engaged in R&D evenly split between its sites in India and Western Europe. The European locations were particularly selected in close proximity to where the technical talent resides. The teams cover the full scope of R&D from fundamental material research to systems design, integration and field analyses. The focus is to design reliable products irrespective of the conditions the turbines have to operate in. Suzlon opened a new cutting-edge Rotor Blade test facility in Vadodara in 2008 equipped to fully validate multiple Rotor Blades up to 65 meters length to standards that far surpass prior practices and are among the most stringent in the industry.

The joint Suzlon-REpower initiative - the Renewable Energy Technology Center (RETC) - also gathered momentum over the past year. The RETC is primarily focused on fundamental research - such as advanced material sciences and applications - that can shape the direction of wind turbine design for the future. The rising momentum of our technology programme is reflected in their increased patent activities markedly in the past year, applications.

To be the most respected brand

Corporate Social Responsibility is integral to Suzlon - its the way they do business. Their CSR effort is based on the premise that the business and its environment are inter-dependent. It focuses on strengthening this organic link through the development of the five capitals - financial, natural, social, human and physical - upon which both business and development depend. Suzlon believes that a higher degree of sustainability can be achieved in business by balancing growth in all these areas. Suzlons CSR framework is strategically designed to encompass all the five capitals in their initiatives through transformative, responsive and proactive programmes. This CSR programme is today an active component of their business and they are committed to building sustainable business practices and fruitful partnerships with all stakeholders including communities and the environment. Through this they wish to achieve their vision of becoming the most respected brand in the world.

To be the fastest growing and most profitable business & to be among the top three wind energy companies in the world
These two statements are intrinsically tied to each other as each isnt possible without the other. Suzlon achieved the completion of the acquisition of 91% stake in REpower, marking in a major step in harnessing group-wide synergies. Both companies have already achieved closer cooperation with agreements to supply components to REpower turbines from the Suzlon supply chain. Suzlon subsidiary Belgium-based Hansen Transmissions commenced commercial operations at its new facilities in India and China, while Suzlons forging and foundry subsidiary SE Forge also commenced commercial production, supplying components to Suzlon and other companies. Suzlon has a presence across the globe and has a huge order book size in every major nation as illustrated in the figure.

Brief Overview of Strategy

Improvement of cost efficiency To achieve the same it aims to ensure effective utilization of in-house manufacturing facilities and relocate at places where manufacturing efficiency are low. Relocation at new places can expose Suzlon to risks of entering into a new market of which it is not yet familiar. It can also lead to extra expenses. Improvement of manpower efficiency Enhancement of manpower efficiency calls for implementation of high-end training and development programs. Such training endeavors can result in high employee costs Negotiation with Suppliers In the past Suzlon has been hit on grounds of rising raw material prices and quality of raw material being supplied to the firm. Furthermore, since Suzlon imports most of its raw material so it exposes the company to foreign exchange fluctuations. To dilute the repercussions of such fluctuations, company aims to enter into stringent negotiations with the suppliers. By doing so it aims to achieve a promising bargaining position in terms of discounts. Any discounts on grounds of raw material can result in reduction of cost of goods sold which can increase the operational efficiency and improve the earnings of the firm Expansion in new markets Given the turbulence in US market and restrictions in the Chinese, market, the firm aims to foray into new markets such as Korea, South Africa. As result firm will have to incur heavy expenditure to expand and run their operations in these booming markets. Growth acceleration through focus on high growth markets and customer needs

Technological Enhancement Suzlon aims to expand its product portfolio and enhance the efficiency of existing products through a range of R&D efforts which will further result in heavy R&D expenditure. Tapping New Markets Given the acquisition of RE power, now Suzlon can leverage its expertise in off-shore wind energy generation. It will help the firm to increase its share in Europe

Need for BSC

The need to develop and implement BSC in the organization is encountered due to the liquidity crisis it faced in the early part of the year 2009. Facing recession Suzlon Energys net profits declined fast amidst concerns of the company facing severe cash-flow problems. When international crude oil prices were surging in recent years, Indias biggest wind power equipment manufacturer, Suzlon Energy, used to be a favourite with investors betting big on the future of clean wind energy amid growing climate change concerns. However, the widening global credit crisis coupled with the falling global crude prices in recent months had led to a tightening financial squeeze for the wind power projects across the world as investors felt that the fight against climate change is going to take a backseat. This had further complicated things for Suzlon, which was already struggling to soothe industry skepticism about soundness of its turbine technology in view of growing cases of the company having to undertake wholesale replacement of equipment supplied in recent past. Suzlon Energys net profit declined 95 per cent in the first half of the current financial year 2008-09, as compared to the same period in the previous fiscal. The company attributed this to foreign exchange losses. Amid concerns that Suzlon was facing severe cash-flow problems, investors had dumped its shares at exchanges. The growing liquidity crisis faced by the organization led to the inception of the idea of putting balanced score card at work. Also, Globalization has made the world more interconnected. What happens in one part of the world impacts the other part. Hence there is a greater need for a collective action by integrating people, process, financials and technology perspectives. Thus a need for performance management system through the implementation of Balanced Score Card is felt in the organization.

STRATEGY MAP
FINANCIAL PERSPECTIVE
GROWTH Profit
ross Profit Ret rn on Eq it Vol e Increase Market Share

PRODUCTIVITY
Cost Red ction Cash Flow Manage ent

%age rowth Vol e New Prod cts Reven e fro new c sto ers

Inventor Manage ent

Working Ca ital Red ction Risk Manage ent

CUSTOMER PERSPECTIVE
CUSTOMER DELIGHT
S eed P rchase Friendl , hel f l e lo ees

WIN-WIN RELATIONS
C sto iza le Sol tions B siness Skills

INTERNAL PERSPECTIVE
INCREASE CUSTOMER VALUE
Understand C sto er seg ents Best-in-class Tea s

OPERATIONAL EXCELLENCE
I rove infrastr ct ral facilit On S ec On Ti e I rove inventor anage ent Ind str Cost Leader

FINANCIAL PERSPECTIVE
EMPLOYEE
O ti Training E lo ee Motivation

BUSINESS DEVELOPMENT
Best Practices Innovative Ca a ilities

N er of Training da s Effectiveness of training

lo ee Satisfaction index %age Staff A senteeis Sales er e lo ee Cost er e lo ee %age e lo ee achieving targets

Knowledge anage ent Feed ack i le entation

Enco rage new ideas Higher R&D s end

The Four Perspectives

Balance Scorecard deals with following four perspectives. We will try to analyse them in case of Suzlon.

The Learning and Growth Perspective This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Government agencies often find themselves unable to hire new technical workers and at the same time is showing a decline in training of existing employees. This is a leading indicator of 'brain drain' that must be reversed. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization. For Suzlon, Learning and Growth perspective can be seen as the growth of employee as well as business. For Employee, Suzlons friendly HR practices should be such that they feel its the best place to work. Various indexes such as employee satisfaction index, commitment index etc. can be used

to measure employee satisfaction levels. This measurement would help to improve and direct the practices in right manner. 'Learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems." Suzlon can have intranet communication to improve communication. Measurement of this parameter can be done using number of training days, Employee knowledge improvement index etc. Improving employee motivation is another factor which can be done using friendly HR practices. This, in turn improves productivity. There can be various measures such as attrition rate, sales per employee, percentage absenteeism etc. The Financial Perspective Here, it would be wrong to disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database at Suzlon, it is hoped that more of the processing can be centralized and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives. There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category. Suzlons main aim should be to be a profitable business. Traditional financial data such as Gross Profit and PAT can help in measuring this. It should also try to increase its market share globally. It should adopt various marketing strategies to increase its sales. Measurement of this growth can be sales reports, market share percentage etc. Suzlon should aim to foray into new markets such as Korea, South Africa. The Customer Perspective Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.

In developing metrics for satisfaction, Suzlon should analyze its customers in terms of kinds of customers and the kinds of processes for which they are providing a product or service to those customer groups. This would help in appropriate targeting. It should run customer survey campaigns regarding their satisfaction. This index would form a good measure and help in retaining customers The Business Process Perspective This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants. In addition to the strategic management process, Suzlons business processes may be identified as: o Mission-oriented processes o Support processes. Mission-oriented processes are the special functions, and many unique problems are encountered in these processes. Suzlons mission is to contribute to sustainable development of the Wind Energy sector through an integrated product design and manufacturing strategy. Suzlon should keep on doing its technological advancements to keep itsel abreast with its competitors. This would provide a growth inline with its mission. The support processes are more repetitive in nature, and hence easier to measure and benchmark using generic metrics. Suzlons supporting processes can be transmitting energy, producing energy. Transmitting is more of a repetitive process and hence its process needs to be checked time and again.