Balancing the Power Equation: Suzlon Energy Limited

Balancing the Power Equation: Suzlon Energy Limited

Based on the case study by Snehal Awate, Ram Mudambi and Arohini Narain.

Set in 2013, “Balancing the Power Equation – Suzlon Energy Limited,” is a case that documents the challenges encountered by an emerging economy multinational enterprise (EMNE) when accessing research and development (R&D) knowledge from its technologically superior subsidiary. It shows the strategies that Suzlon, an Indian wind turbine manufacturer, adopted to catch up with global industry leaders. It tracks how Suzlon’s astute and aggressive chairman, Tulsi Tanti, led the company to develop the capabilities to perform higher value added activities despite being a late industry entrant and one, moreover, from an emerging economy. The setting for the case is the global wind power industry, an emerging high-tech industry. The case thus shows that EMNEs are entering and succeeding not only in mature industries but also in newly emerging industries.

Suzlon Powers its Way

The oil crisis of the 1970s and the subsequent rise in demand for renewable energy sources, such as solar and wind energy, provided the necessary impetus for the establishment and growth of the modern wind power industry. In the late 1980s, the Indian government began promoting entrepreneurship in the sphere of wind energy. Wind power manufacturers were offered many financial incentives such as 100% accelerated depreciation on wind equipment, excise and custom duty relief, a tax holiday for five years and soft loans.

Tulsi Tanti worked in a textile company run by his family, in the coastal city of Surat. The company had begun to experience financial difficulties in the early 1990s, due to rising electricity costs. To deal with the energy crisis, Tanti spotted a business opportunity, and founded Suzlon Energy Limited in 1995 with an initial investment of US$600,000.[1] Tanti invested in two wind turbines made by the German manufacturer Südwind. Although wind power turned out to be a viable alternative for Tanti’s textile business, installing the wind turbines themselves was no easy matter. This was primarily because turbine manufacturers would often only sell the turbines, leaving customers to figure out how to install and operate them.

After entering international markets in the early 2000s, Suzlon had rapidly emerged as the world’s fifth largest wind turbine manufacturer, leaving behind several of its European and American competitors.[2] Headquartered in Pune, in the western Indian state of Maharashtra, the company operated in six continents and had amassed a diverse workforce of over 10,000 people by 2013. Under Tanti’s leadership, the company had developed capabilities to perform higher value-added activities despite being a late industry entrant. Its services ranged from design and development to the manufacture, operation, marketing and maintenance of wind turbines.

Suzlon was not just a supplier, but also an installer, operator and caretaker of wind turbines. To gain expertise in wind turbine technology, Suzlon entered into a technical collaboration agreement with Südwind in 1996. When Südwind went bankrupt Tanti hired Südwind engineers and started manufacturing wind turbines in India. To manufacture an entire turbine from different components, it was necessary to have integrated plants. Recognizing this need, Suzlon lobbied for and then developed special economic zones (SEZs) in India. Tanti helped clients arrange 75% of the initial investment by educating lending banks about the reliability and cost advantage of wind power over traditional power sources.

The wind power industry was a technology-intensive emerging industry and the European firms were committed to research and development (R&D). Clearly, Suzlon with its standard technology could not successfully compete in the international market. Further, it was considered a non-serious player on account of being neither European nor American. Locational disadvantage posed many hurdles for the nascent company, especially since India was primarily known as an exporter of software and services, not hardware. Apart from its European and American competitors, Suzlon faced strong competition from Chinese manufacturers, namely Sinnovel and Goldwind.

Adding Wind to Its Sails

In an effort to reduce costs, generate internal expertise in turbine technology, and increase its presence in global markets, Suzlon orchestrated a series of acquisitions and technology licensing agreements. In 2005, Suzlon set up its subsidiary in Pipestone, Minnesota, in the U.S., to manufacture rotor blades. As Europe was considered the hub for wind power, Tanti focused on acquiring European talent. In 2000, he acquired AE-Rotor Techniek BV, a bankrupt Dutch firm, to set up a rotor blade design facility. The following year, he established a licensing agreement with the Dutch firm Aerpac B.V. to gain access to their rotor blade design expertise. To produce different varieties of rotor blades in India, he bought manufacturing and marketing rights from Enron Wind, a bankrupt American manufacturer of rotor blades.

In March 2006, Suzlon acquired Belgium-based Hansen Transmission, the second largest gearbox manufacturer globally. This provided Suzlon with high-level vertical integration in the wind turbine industry and the capacity for manufacturing the major components of wind turbines, not only gearboxes but also rotor blades, generators and even towers. Suzlon, along with Hansen, was supplying more than two-thirds of the world’s gear-driven wind turbines by the end of 2006. Not only did Hansen have strong R&D capability, it also owned a manufacturing facility based on cutting-edge technology.

In 2007, after fighting off a strong bid by AREVA S.A. of France, the largest manufacturer of nuclear power plants, Suzlon acquired REpower Systems AG (REpower), a large German turbine manufacturer, whose product portfolio included the largest multi-megawatt offshore wind turbine, for €1.34 billion. Suzlon knew that offshore wind turbines were the next big thing because offshore power generation utilized stronger and steadier sea winds that increased turbine “availability” multifold when compared to onshore power generation.  Since REpower, with its technological prowess, was a significant player in this market, Suzlon went after it, rather than trying to build offshore technology on its own. REpower acquisition was a bold strategic step. This takeover of a European company by an Indian one signaled the overall globalization of the wind industry, over which Europe was steadily losing its domination. It was one of the largest overseas acquisitions made by an Indian firm.

Founded in 2001, REpower was the result of a merger of five German companies — three turbine manufacturing companies, one company with research and engineering expertise and one company with project development skills. Its primary focus was the research, design and development of wind turbines. REpower also invested its R&D budget in other components such as rotor blades, controls, electronic systems, tower and gear units, but manufactured them through subcontractors by licensing out its technology. Compared to Suzlon, it was a much leaner company. REpower quickly became the leader in wind technologies, including offshore multi-megawatt wind turbines. It developed the first commercially deployed offshore wind turbine, the 5 MW model installed in the North Sea.[3]

As a first step towards technical collaboration, Suzlon and REpower, with equal stakes, formed Renewable Energy Technology Center (RETC) in Hamburg, Germany in February 2008. In 2011, Suzlon completed the acquisition of 100% stake in REpower and began the integration process. The process started with accessing lower-end manufacturing knowledge through contract production of REpower’s multi-megawatt turbines in India.

Winds of Challenge

The global financial meltdown of 2008 caught Suzlon on the wrong foot. The collapse of Lehman Brothers, one of the biggest financiers of wind power, put the brakes on Suzlon’s upward swing as debt became both scarce and very costly. Both Suzlon and REpower experienced a reduction in sales, which intensified the pressure on Suzlon’s financial performance. Its falling profit margin and mounting debt concerned investors. Multiple challenges were threatening the profitability of the company. Suzlon’s predicament was compounded by the global economic downturn and its own mounting debt, high operating costs and low profit margins. The increase in Suzlon’s debt largely came from the REpower acquisition and in a troubled global economy, it was not easy for Suzlon to sustain its aggressive growth target of 50% per annum.

Tanti knew that the task of maintaining excellent product quality was particularly important for emerging market firms, which typically lacked legitimacy and credibility. Therefore, one of the immediate challenges before Suzlon was to ensure that no quality jeopardizing incident ever happened as had happened with turbine blades splitting at three wind farms of Edison Mission Energy in the United States.

The unforeseen challenges brought on by the REpower acquisition had been among the toughest Tulsi Tanti had ever faced. Could Suzlon move away from the image of a “shareholder” and successfully integrate the German firm?

About the Case Study

“Balancing the Power Equation – Suzlon Energy Limited.” Indian School of Business case no. ISB049 (Indian School of Business, January 2015). Harvard Business Publishing.

About the Authors

Snehal Awate is Assistant Professor of Strategy at the Indian School of Business.

Ram Mudambi is Frank M. Speakman Professor of Strategy and Perelman Senior Research Fellow at the Fox School of Business, Temple University.

Arohini Narain is a freelance writer with the Centre for Learning and Management Practice.

About the Writer

Vineet R Bhatt, Content Lead with the Marketing and Communications department at the Indian School of Business, wrote this summary.


[1] USD = INR 31.41 in 1995,  (Index Mundi:, accessed on January 12, 2014)
[2]Suzlon Website,, accessed on January 17, 2014.
[3] Vietor,R. and J. Seminerio.“TheSuzlon Edge,”Case: 9-708-051. Boston: Harvard BusinessPublishing, 2008, 1-26.


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