Swan Energy’s rollercoaster ride: A turning point or a temporary rebound?

While the broader recent decline remains concerning—the stock has lost 36% over six months and 41% over the past year—Swan Energy has delivered an astounding return of more than 500% since it debuted on the stock markets in 2012.

The Swan Energy stock’s seesaw in recent trading sessions reflects a tug-of-war between bullish optimism and lingering concerns. The stock is currently trading closer to its 52-week low of ₹398.85, a stark contrast from its 52-week high of ₹809.80, reached in December. Given the massive fluctuations, investors are divided on whether the recent rebound signals the start of a sustained recovery or is merely a short-lived bounce within a larger downtrend.

Explosive Q3 earnings

Fueling investor enthusiasm is Swan Energy’s blockbuster December-quarter results that were announced on 14 February. The company posted an astonishing 406.31% year-on-year increase in net profit to ₹582.81 crore and a 19.89% jump in revenue to ₹1,908.19 crore.

Even from the preceding September quarter, Swan Energy’s growth was impressive, with revenue rising 84.87% and profit skyrocketing 1,036.52%, boosted by the company’s aggressive expansion and operational strength despite macroeconomic uncertainties.

However, the financials also revealed potential red flags.

Operating income declined 881.37% quarter-on-quarter and 413.46% on-year, pointing to inefficiencies. Additionally, the company’s selling, general and administrative (SG&A) expenses surged 148.28% from the September quarter and by 171.11% a year earlier, signaling mounting cost pressures that could erode future profitability.

While Swan Energy’s earning per share (EPS) surged 123.39% year-on-year to ₹18.72, analysts remain skeptical about whether the company can sustain this growth in the face of rising operational expenses and fluctuating market sentiment.

Expanding horizons

Despite the turbulence in its stock price, Swan Energy remains steadfast in its multi-sector expansion strategy, aiming to dominate in the textiles, energy, shipbuilding, and defense sectors. In recent years, the company has executed major acquisitions, formed strategic partnerships, and launched ambitious infrastructure projects to solidify its position in these sectors.

One of Swan Energy’s most significant moves was its acquisition of Reliance Naval and Engineering Ltd (RNEL) under a ₹2,100 crore resolution plan approved by the National Company Law Tribunal. This acquisition marked a turning point for Swan Energy, as it transformed RNEL into a key player in India’s shipbuilding and defense sector.

Also, under Swan’s management, Pipavav Shipyard—India’s largest dry dock—was revitalized, and the company successfully completed its first ship refit project ahead of schedule. To further consolidate its naval ambitions, Swan Energy recently merged Triumph Offshore into RNEL.

Also read |Earnings woes dim Senco Gold’s shares. Can it regain its spark?

Swan Energy is also aggressively expanding its footprint in the liquefied natural gas (LNG) sector. The company has signed a joint venture agreement with Singapore’s AG&P Terminals & Logistics to supply LNG in India and globally.

To generate immediate capital, Swan Energy recently sold its floating LNG receipt terminal to Turkey’s Botas for $399 million—a strategic divestment that allows Swan to redeploy capital into high-growth areas while securing its position in the LNG supply chain.

Another bold move was Swan Energy’s ₹4,000 crore deal with Russia’s ROSATOM to build icebreaker ships. The project, executed in partnership with Cochin Shipyard, aligns with Russia’s Northern Sea Route (NSR) initiative, which aims to develop an alternative global shipping lane.

This deal would mark India’s entry into the highly specialized Arctic shipbuilding sector, a domain currently dominated by China, South Korea, and Russia. Given the geopolitical importance of the NSR, this partnership could place Swan Energy at the center of a global maritime transformation.

Swan Energy is also making calculated moves in railways, aerospace, and defense. In November, the company partnered with Balu Forge Industries Ltd to explore new opportunities in these sectors. The two firms established a special purpose vehicle, with Swan holding a 60% stake and Balu Forge 40%, to develop precision engineering solutions for defense and heavy industries.

Also read |Bharat Electronics is riding the defence boom. But is it a long-term bet?

Stay or flee?

Despite Swan Energy’s ambitious expansion plans and strong financial performance, market sentiment remains mixed.

While some analysts see tremendous upside potential for the stock due to the company’s diverse business model and strategic acquisitions, others are wary of the mounting operational expenses.

Some market experts suggest exiting the stock during rallies, predicting a further decline in the share price to ₹385-370. Long-term investors, however, see significant value in Swan Energy’s LNG, shipbuilding, and defense ventures, which could unlock multi-fold growth in the coming years.

The road ahead for Swan Energy

This year is expected to be pivotal for Swan Energy. With numerous high-stakes deals in the pipeline and aggressive expansions in LNG, shipbuilding, and defense, the company is at a crucial juncture. If its projects materialize successfully, the stock could witness a strong recovery.

However, challenges persist in managing costs, optimizing operational efficiency, and sustaining investor confidence.

With a history of resilience and a vision for global dominance, Swan Energy stands at a crossroads. Will it emerge stronger, capitalizing on its diversified ventures? Or will market volatility and operational inefficiencies continue to dictate its stock price?

Also read |For Vedanta, dividends and demerger delays play spoilsport

 

For more such analyses, readProfit Pulse.

 

About the author:Suchitra Mandal is a financial writer with expertise in delivering well-researched insights and detailed analyses of companies’ performance and market trends.

Disclosure:The author does not hold any shares of Swan Energy. The views expressed are for informational purposes only and should not be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.