Tanti plans to set up facilities to manufacture Suzlon’s entire needs for rotor blades, turbines, gear boxes, forgings, rings, et al.
MUMBAI: Tulsi Tanti, the billionaire entrepreneur behind Suzlon Energy, wants to control the entire gamut of the wind turbine generator space through a vertical integration exercise.
Tanti plans to set up facilities to manufacture Suzlon’s entire needs for rotor blades, turbines, gear boxes, forgings, rings, shafts and towers – all of which go into making windmills and generating power from it.
“This (sourcing components) is my bottleneck now,” Tanti says.
Vertically integrating his business helps him reduce dependency on outside vendors and at the same time keep a leash on costs. The first move towards verticalisation was made in March when Suzlon acquired Hansen, a turbine maker in Belgium, for Rs 2,511 crore
Suzlon has been growing at a blistering 100% in the recent past with demand for renewable energy growing exponentially across the globe.
As a result, Suzlon’s profit for the quarter ended June surged 366% to Rs 193.60 crore. Sales witnessed a three-fold increase to Rs 933.77 crore.
The direction of revenues is also changing: Last year 90% of Suzlon’s revenues came from local demand, while this year this accounted for just 60%.
Next year, Suzlon expects to earn 60% of its revenues abroad. The wind mill turbine market has been 100% growth in recent years. Tanti says orders are already stacking up from customers based in the US, Europe, Australia and New Zealand.
Suzlon’s verticalisation gambit will mean straddling Vadodara, Coimbatore, US and China to integrate all the stages of windmill production and power harnessing. The total bill for the vertical integration and other expansion plans comes to Rs 1,500 crore. Suzlon has Rs 500 crore in its kitty, while the remainder Rs 1,000 crore will be through debt, said Tanti.
Suzlon will also invest in R&D capability in Denmark as it tries to tweak technology and keep pace with any disruptive technology in the space. The Danish facility will have 60 engineers. Currently, Suzlon invests 2% of its revenues in R&D.
The company currently has a production capacity of 1,500 mw. By June 2007, it will have added another 1500 mw. In the process, the number of employees in the Suzlon roster will also increase from 3,000 to 7,000.
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