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A brief overview

of

Strategic Analysis

of

Submitted by- Supervised by-

Mohd Kamran Yusuf Dr. Saboohi Naseem

MBA(F) Associate Professor

Faculty of Management Studies and Research,

Aligarh Muslim University, Aligarh

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Table of Contents

Sr. No Chapter Page No

1 Executive Summary 2

2 Introduction to Welspun Energy Limited 3

3 Analysis of Vision, Mission & Core values 5

4 SWOT Analysis 7

5 Porter’s five forces analysis 8

6 Industry Analysis 9

7 Corporate Level Strategies 11

8 Business Level Strategies 12

9 Global Strategies 14

10 Risk and Mitigation Strategies 15

11 Challenges to WEL 16

12 Recommendations 17

13 References 18

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“In the name Allah the most beneficent and the most merciful”

Executive Summary This project is all about the Welspun Energy Limited company. Welspun Energy Limited is the company

which is dealing in renewable energy. Welspun Energy is one of the is the largest companies of renewable

energy in India.

Project:

Provides all the crucial information on Welspun Energy Limited required for business and competitor

intelligence needs.

Contains a study of the major internal and external factors affecting Welspun Energy Limited in the

form of a SWOT analysis as well as a breakdown and examination of strategies of WEL.

Major factors contributing the success of Welspun Energy Limited through Porter’s five forces model

as well as comparing that with its competitor Tata Power, Reliance Power and Suzlon Energy.

Analysis to industry with respect to the competitors of Welspun Energy Limited.

With this project I have tried to understand the different business process identified by the energy producing

Company, as well as analyzing its strength and weakness as compared to other company.

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Introduction

Welspun Energy Limited

The Welspun Group, a $3.5 billion conglomerate has diversified business interests with a major presence

in the following industries:

Energy

Steel pipes

Home Textiles & Retail

Infrastructure

With presence in over 50 Countries, over 22,000 employees and 100,000 shareholders, Welspun truly

represent an amalgamation of expertise, resources, opportunities and engineering excellence. Welspun is

considered one of the premier Global Line Pipe and Home Textile Companies. The group enjoys strong

relationship with marquee clients including most of the Fortune 100 Companies.

Welspun Energy Ltd. (WEL) is a leading independent developer of renewable energy projects with a

vision to commission 1.75 GW of solar & wind projects by 2016. Presently more than 130 MW clean energy

projects are operational and another 200 MW are under development in high radiation zones pan India. The

generator has time and again demonstrated its ability to design, engineer and build solar & wind projects

with high performance outputs and low cost - delivery period.

Part of the US$ 3.5 billion Welspun group, WEL draws on the know-how of its specialized team of

scientists and engineers to design projects by employing cutting edge technologies. Its emphasis of systems

and processes has enabled Welspun Energy for flawless execution by consistently decreasing its on-ground

development cycle. By integrating systems & processes and engineering excellence, WEL has achieved cost

leadership in renewable energy space. Through its cost leadership, Welspun Energy has been instrumental in

bringing the solar tariff close to grid parity.

In its quest for ensuring energy security of the country, WEL has won and commissioned some of the most

prestigious projects in the country. Its 50 MW Rajasthan solar project is India‟s largest solar project to date

and has the distinction of being the fastest executed solar projects of this scale. Through its green power

projects, the organization is working to fulfill its commitment to the people of the country and a greener

environment.

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Solar Energy

Welspun plans to be the pioneering organization to utilize the power of the sun. Welspun plans to install

750MW of solar power plants in the next three years. Through reverse bidding, Welspun won India‟s biggest

solar power project of 130 MW in the state of Madhya Pradesh. Presently over 250 MW of power projects

are being developed through partnerships with leading solar module and equipment manufacturers in order to

enable efficiency at the highest level. The organization aims to develop a total of 550 MW solar capacities in

the state of Karnataka alone and an additional 100 MW in Andhra Pradesh.

Wind Energy

The Indian wind energy sector has an installed capacity of 17,365.03 MW (as on March 31, 2012). India is

ranked 5th in the World. India now ranks amongst the foremost wind energy markets globally. With an

industry projected growth of 20% per year and a favorable policy ecosystem, Welspun Energy aims to

develop 1000 MW of wind power projects in the next three years. The organization envisions developing

wind power projects pan India, with Gujarat, Andhra Pradesh and Karnataka being focus states.

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Analysis of Vision, Mission & Core values

VISION

“OUR VISION IS TO CHANGE THE SOCIAL FABRIC OF INDIA BY EMPOWERING EVERY INDIAN. WE WILL DO IT BY LIGHTING UP INDIA WITH CLEAN, SUSTAINABLE ENERGY AND BY TRANSFORMING THE LIFE OF EVERY INDIAN THROUGH HEALTH,

EDUCATION AND OPPORTUNITY”

Analysis –

From the above statement, it can be abstracted that Welspun Energy Limited is

strongly adhered to making the benefit of their growth to every citizen of India, with a very

great concern with the environmental values along with the social responsibilities.

MISSION

“OUR MISSION IS TO POWER A GREEN INDIA. WE ARE GOING TO HELP INDIA MEET HER GROWING ENERGY REQUIREMENTS IN AN EFFICIENT, ENVIRONMENT-FRIENDLY MANNER. IN THE NEXT SIX YEARS, WE WILL

BECOME A FULLY-INTEGRATED POWER COMPANY BY SETTING UP RENEWABLE ENERGY BASED POWER PLANTS TO HELP MEET THIS GOAL”

Analysis- In above mentioned mission statement top management it is clearly seen that

company wants to achieve its long term goals by making the country self-sufficient in energy consumption with eco-friendly technology.

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CORE VALUE

Our values make us who we are. We do not lose sight of our values and stand by them always

Passion : Our passion for business reflects in our work.

Mutual Respect : Diversity of ideas, talent and experience is always encouraged. We treat others the

way we would like them to treat us.

Integrity : Honoring our commitments is the way of life for us. We always do the right thing and

we take responsibility for our actions.

Partnership: Collaboration is the key for long term growth and mutual advantage.

Sustainability : We love the environment and respect the communities around us. We want to make

the lives of the people better and greener.

Wellbeing : Safety above all else is important to us

Analysis-

The core values of Welspun Energy Limited are totally adhered to human values and they want follow them in long term .It is clear that Welspun does not want to make any compromise with the quality, integrity and ethics at any cost.

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SWOT Analysis of Welspun Energy Limited

Strengths- Efficient supply chain management

First Mover advantage in domestic market

Friendly environment

High market share nationally

Latest technology

High thin film PV manufacturing capacity in India

Strategic tie- ups with renowned companies(Suntech,Trina Solars,Canadian Solar) gives an

opportunity to reduced cost & increased efficiency

Weakness- Less awareness about Welspun PV product portfolio in market.

Relatively small production capacity globally, resulting low economies of scale

High debt on the company

Lack of ecosystem

WEL is a subsidiary of Welspun Corporation Limited manufacturer of Towel, Steel Pipes is at

maturity stage financial of which may supersede the solar subsidiary.

Opportunity- Increasing adoption of subsidy program around the world.

Indian announced JNNSM due to which a spur in demand is expected in Indian market.

Multitechnolgy technology platform to offer differentiated/customized solution to customers

Thin film technology is catching up in Indian market due to its suitability in hot weather and low

price in grid-connected segment.

Plans to touch 1750 MW production in next three years which will give high economies of scales.

Threats- Technology Obsolescence.

Dependence on government subsidies.

Increased competition with the entry og big players.

Raw materials‟ prices are expected to go up.

Political environment may affect the policy of JNNSM.

Constant technological innovation is required.

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Porter’s five forces analysis –Welspun Enrgy Limited

Buyer Power (Moderate)

Very few potential buyers

Sensitive to Pricing

Power Purchase Structure

Supplier Power (Moderate)

High demand for composites

Backward integration by Key Player

Threat of Substitutes

(Moderate to High)

Other renewable technologies

Price substitution from

conventional sources

Falling oil and gas prices

Entry Barriers (High)

Investment costs in Technology

Quality Control Standards

Lack if experience

Access to resources

Industry Rivalry

(Moderate to High)

High exit costs

Competitive pricing

Large/Global Players

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Industry Analysis

Major Competitors of Welspun Energy Limited Green Investing in India makes a great theme but investing in specific CleanTech companies is a tough

task.Some of the biggest Renewable Energy Companies have led to serious losses eg. Suzlon or Moser Baer.

However Renewable Energy in India has a great future and a rising tide will lift all boats. Note the list of solar

power companies is growing by the day while there a number of wind energy companies in India as well.

Then their are green utilities like Greenko, Orient Green Power that are building substantial alternative

energy capacities as well. While writing about all the companies is big and probably not a very useful

endeavor, here is a list o the Top 10 Alternative Energy/Clean Technology Companies in India. It is a

subjective list and should be regarded as such.

Suzlon Energy is the biggest Wind Energy Company by far with 4-5 Gigawatts of WTG

Capacity per year. Its subsidiaries Hansen Transmission and RePower are also big players in the Wind Energy

in Europe. The Company has seen its revenues and profits take a huge hit in recent times but has been recover

in.

This is primarily a Solar Panel Production Company which has recently made a big bet to get into

the Power Production Space as well. Moser Baer Projects Private in which the Blackstone Group made a

$300 million bet has plans of a 20:80 mix of Green and Dirty Power.

The biggest private utility in India has big plans for Clean Energy as well. Its subsidiary Tata BP

Solar is one of the biggest producers of solar panels and cells in the country. The company has huge plans in

wind, solar and geothermal energy. It has also invested in a geothermal energy project in Indonesia..

This Chennai based company is the largest Green Utility in India with more than 200

MW of Renewable Energy Capacity mostly in Wind and Biomass. The company came out with one of the

biggest IPOs in India in 2010.

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This is one of the biggest Green Utilities in India with around 200 MW of Electricity

Capacity predominantly in small hydro and biomass plants.It is listed London’s AIM Exchange and has a top

notch managment team.Its recent performance has been quite good and it is expanding rapidly.

The biggest utility in India will obviously be a big renewable energy generator in the

future as well.While currently it does not have much of renewable energy capacity,it has lined up massive

investments in hydro and solar power.Its trading arm NVVN is the nodal agency for dispersing funds for solar

plants under JNNSM.

The company is part of the Baba Kalyani Group which is a major forgings manufacturer in

India. It was bought over in 2007,when the Kalyani Group and PE firm First Reserve bought over the German

company RSB Consult. The Company mainly makes 2 and 2.5 MW turbines and has production facilities

both in India and Germany. It has wind design capabilities between 1-3.6 MW and with a powerful parent, it

could become a success in the future. Amongst the newer wind energy companies like Lietnar, RRB Energy,

Regen and WinWind,it looks like the one with most potential. Note you can an indirect exposure by investing

in Bharat Forgings.

Summary

There are a number of other Green Companies like Lanco,Reliance Power that have the capacity to become

big players once their solar plants are complete. Besides this foreign companies with a major presence in India

are Siemens, Vestas, Gamesa, Enercon, Hong Kong Light and Power. Getting exposure to these companies

requires investing in the home markets of their parents.

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Corporate Level strategies – Welspun Energy Limited

Develop next-generation products with focus on improving efficiency/cost-per-kWh

Increasing production capacity and strengthening vertical integration

Augmenting Management Bandwidth

Strong focus on driving global growth

Moving up Value Chain with comprehensive end-to-end solutions

Improving Cost Efficiency

Growth Acceleration

Focus on High growth market

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Business level strategy –Welspun Energy ltd.

Research and Development – Best of all World

Vertical Integration

Wind turbine R&D in Germany

Rotor blade R&D in

Netherlands

Gearbox R&D in Belgium

Product & Process Engg,

India

Technology Campus Germany

Engineering Centre India

Innovation Centre Europe

Integrated Business Model

Allows customers to benefit from cost efficiencies

and economies of scale in wind farm

Provides hassle free solutions to customers

Provides greater control over execution time line

Control of value chain from planning to

maintenance

Leveraging experience across wind energy value

chain

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Presence in high growth markets

Right product for the right market

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Global strategy – Welspun Energy ltd.

Expanding Global Presence

Australia - Sustainable and internationally competitive renewable energy industry

USA – It has outpaced Germany in terms of capacity

China - Favorable policies & targets

Foray into new markets – Brazil and Sri Lanka

India – Robust domestic demand

Global Manufacturing Capacity

Manufacturing facilities in India, China, USA, and Germany

WEL has acquired forging and foundry capacity in India

Global Acquisitions

Hansen Transmission

Plugs critical gap in suzlon’s supply chain (gearbox - longest lead time)

Develops long term growth driver in terms of wind and industrial gearbox business

REpower Systems AG

Entry into large European markets

Complimentary product portfolio - offshore technology

Improve REpower margins through synergy

Capitalize on know-how and brand equity

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Risk and Mitigation Strategy of WEL

SI Component Risk Factor Risk Mitigation Measures

1. Land Timely Acquisition of

appropriate land with

adequate radiation.

The total land requirement for the Project is around 320

acres out of which the Company has already purchased

around 158 acres of land. The balance land will be

acquired shortly.

2. Technology Actual performance of

modules affects the financial

returns.

Crystalline technology has been chosen for this project

based on detailed study.

3. Engineering Basic Engineering, Plant

layouts and Detailed

engineering

WEL has got State of Art Engineering Centre at Noida

with more than 100 technical people. This team is being

headed by Mr. S L Kapur who has earlier headed

engineering team of NTPC and Reliance Power. With

this team who has already engineered 5 solar projects,

WEL is confident of using its engineering expertise to

optimize the project

4. Vendor Sub-vendor identification and

Quality of the sub-vendor

WEL has strong procurement and technical capabilities

as demonstrated in successful implementation of 5 Solar

projects by the same team. Further our top management

and promoters are actively involved in cultivating and

promoting vendor relationship

Accordingly WEL is committed to bring best vendors for

the project

8. Revenue

assurance

Long project operation leads

to future revenue risks

Long term certain revenue stream with 20 Years PPA

with TAN

9. Implementation

risk

Implementation risk as project

should be commissioned with

in timelines

WEL has plan of implementing the projects within FY

2014 and it is confident of doing so based on its past

experience of implementing projects before scheduled

time.

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Challenges – Welspun Energy ltd.

1.Transition to being a global supplier

Welspun Energy Limited has negative operating leverage

High start up costs for manufacturing facilities

Increased freight cost

Growth has been fragmented among a growing number of smaller, more dispersed

markets

2.Increased uncertainty on Order Intake – Technology Issues

Blade crack issue - Incremental order intake from US will be challenging

Order sizes have shrunk - Credit availability, which could impact demand

3. Large capacity + Weak demand = Margin Pressure

Industry majors are adding ~13,000MW

Pricing power will shift towards wind farm developers

Supply exceeding demand in the medium term

1.Working Capital Management

Huge inventory hold-up

Poor collections

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Recommendations – Welspun Energy Limited

Sustained Research and Development efforts

Synergize with Repower

Reduction of inventory levels and focus on improving collections

Focus on offshore markets

Special attention to Chinese market

Leveraging on cost advantage (through backward integration and control on the supply

chain)

Diversify into other renewable technologies like Solar PV and Biomass

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References

Web Pages

http://www.google.co.in/

http://www.welspun.com/

http://www.welspuncorp.com

http://www.welspunenergy.com/

http://en.wikipedia.org/wiki/Electricity_sector_in_India

en.wikipedia.org/wiki/Renewable_energy

en.wikipedia.org/wiki/Solar_power_in_India

http://www.mnre.gov.in/

http://en.wikipedia.org/wiki/Jawaharlal_Nehru_National_Solar_Mission

www.jnnsm.gov.in

www.moneycontrol.com

Books and Journals

Welwisher (CSR Journal of Welspun Corp. Ltd)

Business Policy and Strategic Management ( Pro. Azhar Kazmi)