Suzlon looks for fresh investors, but analysts flag turnaround woes

With $172-million foreign currency convertible bonds due next month, Suzlon is once again scouting for fresh investors. Industry analysts, however, said this was not the first time Suzlon was attempting to get its act right. 

There are fears that the stress in the wind sector is expected to thwart any turnaround for the company. “Turnaround of any stressed assets in the wind sector will take time, as we do not see the sector see an improvement in medium-term due to tariff caps and limited availability of financially viable wind resource areas,” said Ratnam Raju, associate director- infrastructure and project finance, CARE Ratings. 

While the weakness has contributed to Suzlon’s bad financial health, industry experts pointed out that a long-term strategy was missing. “Suzlon’s biggest pain point has been mismanagement and short-term thinking,” said a senior analyst, with a brokerage firm. As Suzlon’s stock price dipped over the years, most brokerage firms have stopped coverage on the stock. On Friday, Suzlon closed at Rs 4.55 per share. 

Officials at Suzlon declined to comment on queries related to what has led to the delay in debt restructuring and what is the plan ahead.

Brookfield is making a bid for Suzlon Energy but would require 45 days to complete the due diligence, the company’s lenders were informed.

In earlier attempts at divestment, Dilip Shanghvi in 2015 picked up a 23 per cent stake for Rs 1,800 crore in the company. Tulsi Tanti, chairman and managing director, Suzlon, expected fund infusion to help deleveraging and liquidity to ramp up volumes rapidly. “Having faced multiple crises over FY09-14, we believe Suzlon is on the cusp of a turnaround. It has aggressively reduced debt from its heavily levered balance sheet by divesting its German arm Senvion (for ^1billion) and via preferential issue of Rs 1,800 crore to Dilip Shanghvi and Associates,” said analysts, with HDFC Securities in a March 2015 report on the company.  The relief, however, was short-lived and the company slipped back into the red in FY18.

It was seen, the last one decade would lift hopes of analysts and industry experts for Suzlon, but it met with disappointment. For instance, Suzlon’s Rs 830 crore worth remaining stake sale in Hansen Transmissions was also expected to help deleverage. “The proceeds of this stake sale would provide cash to finance buyout of Repower and deleverage its balance sheet,” said analysts, in AK Stockmart report in October 2011. On the contrary, Capitaline data shows, debt for the company rose to Rs 14,034 crore in FY12 from Rs 12,240 crore in FY11. A year later in 2012, Suzlon announced plans to enter corporate debt restructuring (CDR).

 Suzlon has been shifting its goal post to exit CDR ever since, which was earlier set for March 2017. The timeline was later pushed to first-half of FY18 and has not been met yet. For FY18-19, the company reported a consolidated loss of Rs 1,527.2 crore and an outstanding debt of Rs 9,623.9 crore.