Independent Indian directors quit Suzlon Energy; investor hunt continues

Even as Suzlon Energy scrambles to find a new investor, all independent Indian directors including bank nominees have resigned from the board over the past two months. The company is reeling from Rs 7,000-crore debt and is trying to sell promoter stake to pay it off.

Suzlon, India’s leading wind turbine manufacturer, defaulted on payment of Rs 1,169 crore ($172 million) due to its foreign currency convertible bond (FCCBs) holders in July.

Since then, all independent Indian directors have resigned citing several reasons. CARE Ratings in April downgraded Suzlon’s debt to a default rating.

One of the independent directors who quit said no director would like to remain with a company that had a defaulter status. “It affects the reputation of the director and the other companies that they are associated with,” he said, requesting anonymity.

Directors who have resigned are Ravi Uppal, former managing director (MD) and group chief executive officer (CEO) of Jindal Steel & Power, lawyer Vijaya Sampath, and energy sector expert Venkataraman Subramanian. Nominee directors to the board from banks were IDBI Bank’s B G Kozipattu and State Bank of India’s Prathima Ram; they have also quit.

The board does not have any woman as mandated by the market regulator. The current board members are family members of founder Tulsi Tanti and two independent directors who are foreigners.

They are Per Hornung Pedersen, former CEO of Switzerland-based REPower Group, and Marc Desaedeleer, chief investment officer of Citigroup Venture Capital International. Pederson has been on the board since 2004.

A spokesperson for the company said, “The reasons for the resignations are not company specific.” Suzlon did not respond to a query about the resignation of the bank nominees.

In a filing to the BSE on September 27, Vijaya Sampath said she has resigned “with the intent to reduce my exposure in energy-related companies and focus more of my attention on the companies in which I continue to be an independent director.” Ravi Uppal in his statement referred to personal reasons for not being able to devote time to the company.

Venkataraman Subramanian, in a BSE statement on October 4, said, “Due to increased commitments on the boards of various other companies as well as family commitments, I am not able to participate and effectively contribute in the board and committee meetings of Suzlon.”

Officials of proxy advisory firms said Suzlon was allowed to go ahead with business despite not having any Indian independent directors. But, this might be a regulatory concern.

“There is no law that mandates an Indian independent director. Lack of one is less of a shareholder concern and more for the regulators,” said Amit Tandon, founder and managing director of corporate governance and proxy advisory firm IiAS.

Tandon also said, “In case of any future inquiry, regulators may find it difficult to question or hold a foreign director accountable.”

In its email, Suzlon said, “We would definitely need to induct independent directors, including an independent woman director, as may be required, as soon as possible.”

For the quarter ending June 2019, Suzlon reported a net loss of Rs 337 crore and revenue of Rs 833 crore. Its consolidated net term debt including, FCCBs, was at Rs 7,751 crore and working capital debt was at Rs 4,000 crore.

Suzlon’s attempts to bring on board have not borne results. In 2015, Dilip Shanghvi picked a 23 per cent stake for Rs 1,800 crore in the company. The relief, however, was short-lived and the company slipped back into the red in FY18.