JM Financial said Suzlon Energy's selling of its iconic corporate office, Suzlon One Earth, at a fairly-valued transaction would strengthen the company’s financial health and operational efficiency. With the company paying annual rent of about 12 per cent of the sale consideration against FY24 return on equity (ROE) of 28 per cent, it views the asset-light strategy as value accretive.
"The asset-light strategy of the company is value-accretive, enhancing its increasing working capital needs for higher project execution," the brokerage said in a flash note.
Considering Suzlon Energy's increasing order book and the project sites, the decision to sell its large corporate office space appears both strategic and working-capital friendly, the domestic brokerage said.
"With the shift away from owning such extensive office facilities and planned sub-leasing of the property is likely to help the company in mobilizing more working capital for enhanced execution. The transaction, valued within the current market range of Rs 7,500 to Rs 9,500 per square foot in Pune’s Hadapsar area, seems fairly priced with annual rent under the lease of . Rs 45-50 crore (JMFe)," JM Financial said.
JM Financial said it views the transaction positively, recognising its potential to strengthen Suzlon's financial position and operational performance amid favorable market conditions and effective asset-light strategy. The brokerage did not offer any target price in teh flash note.
Earlier this week, ICICI Securities revised its target on Suzlon Energy Ltd to Rs 80 from Rs 70 earlier, but maintained its 'Add' rating on the stock, owing to a sharp jump in the share price recently. It values Suzlon Energy's business at 50 times estimated FY26 earnings of Rs 1.60 per share.
ICICI Securities said Suzlon Energy would utilise the raised capital to increase execution and capability to gather incremental orders. This, it said, is in line with its strategy to sell non-core assets, as stated in April 2022.