Investors will closely monitor Suzlon Energy when the markets open on Monday. The wind power leader has seen its penalty significantly reduced and has announced substantial growth plans, yet it faces a considerable technical challenge as its stock hovers around Rs51.
Penalty Reduced but Uncertainty Remains
In a statement released on Friday, Suzlon disclosed that a penalty levied on its subsidiary (now merged) for violations related to e-way bills has been reduced to Rs50,000 from the initial Rs19.5 lakh. The remaining amount will be refunded.
Additionally, the company incurred a penalty of Rs 1 lakh to the Central Ground Water Authority (CGWA) for the delayed submission of a groundwater NOC application, a regulatory oversight that it claims will not significantly affect operations. While these actions may alleviate some investor concerns, they occur against a backdrop of weak technical momentum.
Significant expansion and investments in anticipated demand
Suzlon is advancing with its ambitious plans for capacity expansion. The company intends to establish three AI-driven “smart-blade” manufacturing facilities in Gujarat and Karnataka, with a third site still to be determined. Once these factories are operational, they will enhance Suzlon’s current manufacturing capabilities, expediting the execution of its substantial 6.2 GW order book.
This expansion will be supported by an annual capital expenditure allocation of Rs500-550 crore, sourced from internal funds. Suzlon states that this initiative is part of a larger strategy to modernize its 15 factories by incorporating automation, robotics, digital workflows, and quality-control systems to boost efficiency and production.
If successful, this initiative could enable Suzlon to increase manufacturing capacity, satisfy the growing demand for wind energy, and lessen dependence on external supply chains – potentially serving as a long-term growth catalyst.
Stock technical indicators indicate a cautious outlook
As per analysts from Choice Broking, Suzlon is currently trading at approximately Rs51.3 following a decline of over 15% in the last month, which indicates significant downward pressure. The stock is positioned below all key exponential moving averages (EMAs), which are consistently trending downward, exemplifying a typical bearish trend.
Reportedly, every attempt at a rebound encounters supply pressure; trading volume remains elevated, predominantly on days when the stock declines, implying active distribution rather than accumulation. Choice Broking identifies immediate support levels around Rs48 to Rs47.5, with a breakdown below these levels potentially driving Suzlon down to Rs45 to Rs44. Conversely, any upward movement towards Rs53 to Rs55 is expected to face resistance near the declining EMAs.
The firm recommends that investors and short-term traders refrain from initiating new purchases until Suzlon achieves a solid close above the 20-day EMA, which is a crucial prerequisite for any meaningful rebound.