Suzlon Energy, a prominent player in the renewable energy sector, outlined significant risks in its annual report released on August 14. Investors are advised to consider these risks carefully when evaluating the company’s stock.
Market Risk
Suzlon Energy has identified market risk as a critical concern, which involves fluctuations in the fair value of future cash flows due to changes in market prices. This includes exposure to interest rate and foreign currency risks. As of March 31, 2024, the company reported exposure of ₹433 crore in financial assets in Indian Rupees, ₹143.5 crore in Euros, and ₹64 crore in other foreign currencies. On the liabilities side, the exposure was ₹506 crore in US Dollars, ₹102 crore in Euros, and ₹73.47 crore in other currencies. Significant currency fluctuations could lead to substantial variations in these figures, impacting financial performance.
Credit Risk
Credit risk arises from the potential failure of customers or counterparties to meet contractual obligations. Suzlon’s credit risk primarily involves trade receivables and financial instruments. The company stated that its risk from trade receivables is mitigated by a diverse customer base, with ongoing monitoring of these accounts. Financial instruments such as cash, term deposits, and mutual fund investments also contribute to the company’s credit risk profile.
Liquidity Risk
Liquidity risk pertains to the company’s ability to meet its financial obligations as they become due. Suzlon Energy manages this risk by maintaining sufficient liquidity through cash flow projections, reserves, and banking facilities. Effective liquidity management aims to ensure timely payment of liabilities and operational continuity.
Investors should be aware of these risks when considering investment in Suzlon Energy, as fluctuations in market conditions and financial stability could affect the company’s performance.
