Wind energy major Suzlon, which slipped in the red during FY10 is likely to see tough times persist for a while, say analysts tracking the company.
Alternative energy has been one of the big casualties of the recession as companies globally cut spending on this front during the crunch.
The softening demand continues to hurt companies such as Suzlon, which had made a global business of supplying windmills in the boom years.
Suzlon’s problems were magnfied by the debt it had taken on to fund two large European acquisitions in the boom years.
Suzlon continues to struggle with high debt, weak demand and pricing pressure even now, say analysts tracking the sector. To help bring down its debt, the firm is going ahead with a rights issue. However, the medium term outlook for the company remains weak.
Macquarie, a brokerage house, has cut the price target on Suzlon to Rs 42. The broker sees the weaker demand from US, a key market, as a big risk. There is also a concern that European governments may reduce sops to alternative energy to cut fiscal deficits — as they face another financial crisis.
Business continuity remains a key concern, says Merrill Lynch, another broker, as the company’s current order backlog is 23 per cent lower than last year’s levels. Given the high fixed costs and the weak order outlook, the company is unlikely to become profitable, says JP Morgan, another brokerage house.