Suzlon, Inox Wind tank up to 5% as Centre weighs reverse auctions of wind power

"After the sharp decline in capacity additions, the bidding process was changed to ‘2-parts closed bids’ in early 2023, giving a new lease of life to the sector. Current move, however undesirable from policy uncertainty perspective, is likely to have insignificant impact given the large market size (>10GW/yr) as evident from under-subscription," said JM Financial in a note.

In the reverse auction mechanism, the bidders bid against each other until a bid is not challenged by a counter-offer. The method did not result in enough wind capacity installations, leading the ministry to scrap the method.

In January 2023, the Centre revised the auction process for wind energy projects. It also set a target to invite bids for 8 gigawatts (GW) of projects each year till 2030, the ministry of new and renewable energy (MNRE) said on January 12.

While the tariffs did come down as a result of reverse auctions, it wasn't enough to support capacity installations. Following the implementation of the closed bidding system, tariffs began to rise again.

JM Financial maintained its buy rating on Suzlon despite prevailing policy
uncertainties, with a target price of Rs 54, underpinned by strengthening order book, enhanced financial health, and a robust bidding pipeline.

Suzlon shares have gained more than 75 percent over the past six months, with Inox Wind shares surging around 170 percent during the same time period.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.