Suzlon Energy stock hits multi-year high on Renom acquisition; shares rise 290% in a year, should you buy?

The acquisition of Renom represents a strategic move by Suzlon, enhancing its capabilities, expanding its market presence, and creating value.

Shares of Suzlon Energy hit a 5 percent upper circuit to scale a multi-year high of Rs 73.05 on NSE. The recent surge comes after the renewable energy player signed definitive agreements for acquisition of 76 percent stake in Renom Energy Services from the Sanjay Ghodawat Group (SGG).

Renom is the largest Multi Brand Operations and Maintenance service (MBOMS) provider in the country with assets of 1,782 MW in Wind, 148 MW in Solar, and 572 MW in BOP under maintenance across customer segments.

It operates in seven windy states and has experience maintaining turbines from 14 different manufacturers. The acquisition will occur in two stages: an immediate purchase of 51 percent for Rs 400 crore and an additional 25 percent within 18 months for Rs 260 crore.

Suzlon Energy will not merge Renom with itself and it will continue as an independently managed company, said Suzlon Group CEO JP Chalasani in an interaction with CNBC-TV18. The Operations & Maintenance (OMS) business will provide stability to Suzlon's financials, he added.

The stock had ended at an upper circuit of 5 percent in the previous session as well.

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Morgan Stanley has issued an overweight call on Suzlon, with a target price of Rs 73.4 per share. According to the international brokerage, the acquisition of Renom Energy Services marks a strategic entry into the multi-brand Operations and Maintenance Services (OMS) sector.

The implied valuation of 4x price to sales is considered cheaper than its listed peer, MS said in its note.

JM Financial has maintained its 'buy' rating on Suzlon stock. The company is likely to leverage Renom for capturing 32GW non-Suzlon OMS market (10GW immediate opportunity) which is growing with India's target of 100 GW wind energy capacity by FY30.

The acquisition will expose Suzlon to new sites, potentially benefiting from emerging repowering opportunities, it noted.

"We believe the acquisition represents a strategic move by Suzlon, enhancing its capabilities, expanding its market presence, and creating value," the brokerage said.

Also Read | With Renom, Suzlon takes pole position in wind energy services market

At 11:43 am, Suzlon Energy shares were trading 4 percent higher at Rs 72.58 apiece on the National Stock Exchange (NSE). With today's sharp upmove, Suzlon's market capitalisation has reached close to the Rs 1 lakh crore mark, currently at Rs 99,800 crore.

This year, the stock has surged approximately 88%, significantly outpacing the Nifty 50, which gained over 11%. Over the past year, the stock has delivered exceptional returns of around 290%, nearly quadrupling investors' capital.

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