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October 07, 2007

Profile of Wind Power firm Suzlon Energy

Businessworld has a cover story on wind energy firm Suzlon Energy and its founder Tulsi Tanti.
Tanti has also made bold strategic decisions that have changed the way the entire industry works. Suzlon’s competitors largely outsource the various windmill components — the gear box, blades and generators — then assemble the turbines locally and supply them to customers. These buyers were mostly interested in the 80 per cent depreciation available on the capital investment that the turbines brought them. Some wind turbine makers such as NEPC Micon faced problems of execution. MNCs such as Vestas and Enercon, too, did not maintain machines after the initial sale.

...Tanti, smart enough to seize an opportunity when he saw one, decided to sell end-to-end solutions to customers unlike his competitors. This wasn’t easy. “Tanti took the risk of investing in identifying large wind tracts, studying the zones over a two-year period, setting up the wind farms and then selling them to corporates,” says S.D. Singh, CEO of Chennai’s Vestas RRB, a key competitor of Suzlon in India. Suzlon began handling entire projects from inception; from assembly of the machine, to operations, to maintenance.

Suzlon’s $600-million (Rs 2,460-crore) acquisition of gear box manufacturer Hansen Transmission was also a strategic masterstroke. One of the biggest concerns for wind energy companies in this booming market is a serious shortage of components. “This has strained the ability of manufacturers to meet demand, especially in gearboxes and large bearings,” says Brandon Owens, director of the Global Power Group, Cambridge Energy Research Associates. Enter Hansen, which will ply Suzlon with much needed components such as gear boxes, rotor blades and generators. Meanwhile, Suzlon is also building a forging and foundry unit in India to meet requirements of smaller components in the supply chain. In a short period of time, the company has essentially occupied all possible places on both the supply as well as the value chain — an astonishing feat considering its humble beginnings.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.