Inox Wind To Suzlon: Favourable Macros Evident In Growing Order Books

After a sluggish capacity growth of only 5.2% from fiscals 2017 to 2024, macros for the wind energy sector are now rebounding. Various government initiatives and expectations of strong wind energy capacity additions could benefit wind engineering, procurement, and construction players like Inox Wind Ltd. and Suzlon Energy Ltd.

The growing traction is evident in the companies' order book growth in first quarter of fiscal 2025, and stand to provide a huge revenue potential.

Weak Capacity Additions

Domestic wind capacity grew just 5.2% from FY17 to FY24, compared to a 31.1% increase in solar capacity, according to the Central Electricity Authority. This slowdown followed the government's removal of the feed-in tariff in FY17.

A feed-in tariff guarantees a fixed price for renewable energy, like wind power. Without this assurance, wind projects faced greater financial uncertainty due to market fluctuations.

Macros Turn Favourable

However, the wind sector is now seeing a resurgence, driven by various factors, especially favourable government policies:

• The government has removed the requirement for reverse auctions for standard wind projects, simplifying the development process.

• The government has held auctions dedicated to wind and hybrid projects to stimulate development of new projects and attract investment.

• The government has established renewable obligations focused specifically on wind power, thereby mandating a certain percentage of energy to be derived from wind sources.

Domestic Demand

The government has set a target to add 10 GW of wind capacity per year over FY24-30.

According to Devansh Jain, executive director of Inox Wind Group, and Suzlon Energy's management, the domestic market for wind energy in the current fiscal stands between 5 GW to 5.5 GW. The next financial year could see a 7 GW market, with demand increasing to 8-10 GW per year during the fiscal ended March 2027, Jain said.

As per Investec, industry experts believe that the market could be fueled by another 3-4 GW capacity from the commercial and industrial sector, taking the overall opportunity across the sector to 13-14 GW each year.

Even if 20-40% of the tenders don't float in, the total opportunity size would still be around 10-12 GW per annum, which provide a robust growth opportunity for wind equipment players like Inox Wind and Suzlon Energy, Investec said.

Order Book Growth

Tendering activity across wind sector has also seen strong traction, with 18 GW of projects tendered or auctioned in FY23 and FY24, the brokerage said. This tendering has already scaled up the order book for Inox Wind and Suzlon to near their lifetime high level of 2.9 GW and 3.8 GW, respectively.

Inox Wind's current order book stands at 2,917 MW as of the first quarter of fiscal 2025. This stands fourfold of the 619 MW order book of the company at the start of FY24.

Suzlon Energy's order book stands at 3,817 MW as of Q1 FY25. This is 30% higher than the same period a year ago, and marks a 5.9 times growth in the company's order book since March 2023.

Revenue Potential

Both, Inox Wind and Suzlon Energy earn Rs 6 crore in revenue per megawatt, as per management commentary.

This implies that Suzlon Energy's current order book has a revenue potential of Rs 22,902 crore, while Inox Wind's order book has a potential of Rs 17,502 crore.

Suzlon Energy has not given an exact execution timeline for its current order book. However, the company can ramp up its execution to 1.4 GW and 2.4 GW in FY25 and FY26, according to Nuvama Research. The brokerage also expects the company to clock in a 67% annual revenue growth to Rs 10,934 crore.

Inox Wind has guided to execute 800 MW and 1,200 MW of orders in FY25 and FY26, respectively. It has completed 17.5% of the FY25 execution as of the first quarter. The 800 MW implies a Rs 4,800 crore topline.