Suzlon shares drop 5% after independent director quits over governance issues

Shares of Suzlon Energy plunged 5% in opening trade on Monday after one of its independent directors resigned, citing corporate governance issues. Marc Desaedeleer, independent director of the company, resigned on June 8, 2024, alleging that “cooperative governance standards applied by the company did not meet his expectations including situations where communications lacked the level of openness and transparency”. Desaedeleer’s term was scheduled to end in September 2024.

“We discussed several of these situations, some were shared with board members, and I sent you recently a note covering these situations with the hope that this information can be used in a construction manner,” Desaedeleer said in his resignation letter.

Weighed down by the development, Suzlon shares dropped as much as 5% to ₹47.35 on the BSE in early trade. The market capitalisation of the renewable energy solutions company slipped to ₹65,557 crore, with more than 52 lakh shares changing hands in the opening trade.

Suzlon shares have seen a strong rally in the last one year, with stock price surging four-fold from its 52-week low of ₹13.28 on June 23, 2023, to a 52-week high of ₹52.19 on June 4, 2024. In the calendar year 2024, the stock has risen 24%, while it gained over 19% in a month.

Nuvama Institutional Equities in a report says that Suzlon CEO clarified on a call that the issues raised were soft in nature and process-oriented, which would be implemented in due course. “Management reiterated that all legal and financial disclosures have been fully complied with, as per regulations.”

The management in its response clarified that none of the suggestions revolved around financial or operational irregularities or non-compliance with law. "Suggestions were on the matters that did not meet Desaedeleer’s personal standard of expectations and speed of implementation," it said.

The brokerage has retained ‘BUY’ call on Suzlon with an unchanged target price of ₹53, citing the wind sector’s structural upturn and financial turnaround of the company.

“With Suzlon turning around its financial position and the operational ramp-up expected in FY25, management is looking to address the needs of the business first, and intends to implement such best-in-class suggestions in due course,” the agency says in its report released on June 9.

In the fourth quarter ended March 31, 2024, Suzlon reported a nearly 21% decline in consolidated net profit to ₹254 crore as compared to ₹320 crore in the year-ago period, mainly due to certain exceptional items. Total income increased to ₹2,207.43 crore from ₹1,699.96 crore in Q4 FY23.

For the full financial year 2023-24, the consolidated net profit slipped to ₹660 crore from ₹2,887 crore a year earlier. The total income, however, rose to ₹6,567.51 crore in FY24 from ₹5,990.16 crore in the last fiscal.

As of May 24, 2024, the cumulative orders of the company stood at 3.3 GW. This includes the order book as on March 31, 2024 of 2,929 MW, plus orders secured subsequently of 402 MW.

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