From Textiles to Warships: Swan Energy’s Rise to a New Pedestal...

Long Term Target: ₹5000

Swan Energy Ltd (Rs.443.60), a century-old conglomerate, has undergone a remarkable transformation from a textile-focused entity to a diversified powerhouse with strategic interests in shipbuilding, energy, and LNG logistics.  Photo: The Wire.

Under the leadership of billionaire and the blue eyed boy from the NaMo - camp, Nikhil Merchant, the company has made aggressive strides across multiple sectors, particularly in LNG infrastructure, shipbuilding, and defence engineering. With the recent flurry of joint ventures, mergers, and financial turnarounds, Swan Energy has positioned itself as a formidable player in India's evolving industrial landscape.

Swan’s Expanding Business Empire:

🧨LNG & Gas Logistics: Swan-AG&P Joint Venture:

In a game-changing move, Swan Energy has entered into a joint venture with AG&P Terminals & Logistics, a subsidiary of US-based Nebula Energy. This partnership will focus on LNG supply and logistics across India and beyond. Swan Energy will own 51% of the LNG supply unit, while AG&P will hold the remaining 49%.

Additionally, AG&P will acquire a stake in Swan Energy’s LNG regasification terminal and jointly establish an FSRU (Floating Storage and Regasification Unit) venture, where AG&P will hold 51% and Swan Energy 49%. FSRUs are critical for converting LNG back into gaseous form for transportation and distribution, reinforcing Swan’s role in India's LNG supply chain.

The collaboration is subject to due diligence, but if successfully executed, it will strengthen Swan’s foothold in the LNG infrastructure space, which is crucial for India's growing energy demands.

🧨The Jafrabad LNG Terminal & FSRU Ventures

Swan Energy's flagship LNG terminal at Jafrabad in Gujarat is designed to handle 10 MMTPA (Million Metric Tonnes Per Annum) of LNG imports. This facility is part of India’s broader efforts to increase natural gas imports and reduce dependence on crude oil.

The FSRU, initially intended for this terminal, was instead leased to Turkey’s state-owned gas company, Botas, due to project delays caused by the COVID-19 pandemic and a typhoon. Swan agreed to divest a 51% stake in the FSRU, Vasant One, to Botas for $399 million, while IFFCO holds the remaining 49%.

Currently, the FSRU earns a daily rent of $250,000 under a one-year bareboat charter with Botas, making it a significant revenue stream. If the divestment deal materializes, it will provide a liquidity boost to Swan Energy for further expansion.

🧨Defence & Shipbuilding: The Rise of Swan Defence

Swan Energy’s foray into shipbuilding and defence engineering gained momentum after acquiring the bankrupt Reliance Naval and Engineering Limited (RNEL) in 2021. Now rebranded as Swan Defence, the shipyard resumed operations in December 2024, marking its revival with the successful refit of the Indian Coast Guard’s fast patrol vessel, Raj Ratan.

Located in Gujarat, Swan Defence boasts India’s largest dry dock (662m x 65m), one of the world’s largest, along with a 600-tonne SWL goliath crane. The shipyard is equipped with:

• Modern fabrication, piping, and painting facilities (12,000 tons/month capacity)
• A pre-erection berth (980m x 40m) for assembling mega blocks
• A 350m-long dual berthing quay for afloat fit-out and commissioning

The defence segment could be a potential goldmine for Swan Energy as India's naval modernization picks up pace, and the shipyard starts securing orders for warships, submarines, and commercial vessels. In future of there is a demerger of the shipping divison, the shareholders stands the change to get its shares.

🧨Merger of Triumph Offshore & Reliance Naval (Swan Defence):

To streamline operations, Swan Energy has approved the amalgamation of Triumph Offshore Pvt Ltd (TOPL) with Reliance Naval and Engineering Ltd (RNEL). This move, finalized on November 22, 2024, will improve Swan Defence’s financial position as RNEL’s debts were largely wiped out during its insolvency resolution process.

Importantly, no cash consideration is involved, and instead, preference shares of RNEL will be issued to the shareholders of TOPL in a 1325:1000 ratio. This restructuring strengthens Swan Defence’s balance sheet and allows for dividend payouts in the future. 

Swan Energy Ltd's foray into renewable energy sector: 

It has significantly advanced its renewable energy initiatives in recent years, aligning with global sustainability trends and India's energy transition goals.

Solar Energy Projects:

In 2023, Swan Energy entered into a landmark agreement with the Karnataka Government to establish India's second-largest solar power plant. This ambitious project underscores the company's dedication to expanding the nation's renewable energy infrastructure and reducing carbon emissions. 

Additionally, Swan Energy has executed several notable projects:

16 kW Energy Storage Project in Poes Garden, Chennai: This project features two 8 kVA Swiss-made Studer Inverters paired with a 30 kWh Lithium-Ion Battery Bank. The system delivers a rapid response time of under 10 milliseconds and a peak power output exceeding 20 kVA, catering to high-demand applications while ensuring optimal safety and thermal performance. 

70 kW On-Grid Installation at a Factory in Kattur: Comprising high-quality imported REC panels integrated with Aerocompact structures and multi-MPPT inverters, this installation ensures top-tier performance. It also includes DG Sync and Consumption Monitoring facilities to enhance operational efficiency.

🧨Swan’s Core Business: Textiles & Real Estate: A comprehensive overview:

While energy and defence are the new growth drivers, Swan Energy’s core businesses in textiles and real estate remain stable. The company manufactures and markets a variety of fabrics, including cotton, polyester-cotton, linen, and viscose.

The real estate segment involves residential and commercial developments as well as warehousing projects.

Elaboration: Swan Energy Limited, established in 1909 and formerly known as Swan Mills Limited, has a rich legacy spanning over a century in India's industrial landscape. The company has diversified interests, notably in textiles and real estate, contributing significantly to its growth and reputation.

Textile Division:

Swan Energy's textile division has been a cornerstone of its operations since its inception. The company manufactures and markets a diverse range of fabrics, including cotton, polyester-cotton blends, linen, viscose, and non-lycra products. 

In 2011, Swan Energy re-entered the textile sector by establishing a state-of-the-art fabric processing unit in Ahmedabad, Gujarat, with an annual capacity of 360 lakh meters.

In 2021, the Ahmedabad plant underwent a significant expansion, increasing its capacity to 3 million meters per month. This enhancement positions Swan Energy to better serve both domestic and international markets. 

The company has been actively presenting its fabric range to renowned brands, retailers, ready-made garment manufacturers, exporters, buying houses, and large traders. 

This strategic move aims to penetrate export markets now dominated by countries such as Bangladesh, Vietnam, South Africa and China. The company is looking for fresh businesses in Latin America and the USA.

Real Estate Division:

Swan Energy's foray into real estate has been marked by notable projects that underscore its commitment to excellence. Since 2004, the company has completed two large-scale projects in Mumbai:

1. Peninsula Techno Park: A commercial IT park located in Kurla, comprising four corporate towers.

2. Ashok Gardens: A residential complex situated in Sewri.

These developments highlight Swan Energy's adaptability and expertise in executing contemporary architectural projects.

Financial Performance: A Massive Turnaround:

Swan Energy’s financials have witnessed a dramatic improvement:

• Net Profit: ₹582.81 crore in Q3 FY25, up 406.3% YoY from ₹115.11 crore in Q3 FY24
• Revenue: ₹1,908.18 crore in Q3 FY25, up 19.88% YoY
• Total Expenses: ₹2,669.75 crore in Q3 FY25, down 87.94% YoY
• Employee Expenses: ₹28.90 crore (up 171.36% YoY)
• Finance Costs: ₹44.73 crore (down 22.24% YoY)

The profit surge is attributed to:

• Higher LNG operations income.
• Revenue from the FSRU lease to Botas.
• Cost optimizations in shipyard operations.

Stock Market Outlook: Can Swan Reach ₹5,000?

Swan Energy’s stock is currently trading around ₹443.60, with analysts expecting a short-term target of ₹860-₹865. However, the ambitious ₹5,000 target, as mentioned by some financial dailies in 2023 seems highly improbable in the near future due to:

• LNG Sector Risks: LNG demand is volatile, and pricing fluctuations could impact earnings.
• Delayed Execution: Key projects, including the Jafrabad LNG terminal, have faced multiple delays.
• Capital-Intensive Business: Shipbuilding and LNG terminals require massive capital, which could strain cash flows.
• Debt & Financial Leverage: While RNEL’s debt was reduced, Swan still has substantial financial obligations.
• Competitive Market: The LNG and shipbuilding sectors are highly competitive, with large players like GAIL, Petronet LNG, and Mazagon Dock Shipbuilders posing stiff competition.

That said, if:

• Swan Defence secures major defence contracts.
• The LNG terminal starts full-fledged operations.
• FSRU deals are successfully monetized.

Then, a long-term target of ₹1,500-₹2,000 could be realistic. However, a target of Rs.5000 can't be ruled out, considering the nearness of Nikhil Merchant towards Narendra Modi and its upcoming mega - renewable energy project.

The Final Verdict: Swan Energy’s Bright Future, But With Challenges:

Swan Energy’s transition from a textile player to a diversified conglomerate is commendable. Its LNG, shipbuilding, and defence ventures hold immense potential, and the financial turnaround is promising. However, execution remains key, and the path to ₹5,000 per share will require flawless project execution, sustained earnings growth, and strategic capital management.

For now, Swan Energy is on a new pedestal, but investors must watch out for execution risks before betting on a multi-fold price surge.