Suzlon on a comeback trail

Suzlon Energy, India’s largest and one of the top five wind energy turbine makers in the world, is on a comeback trail after turbine blade cracking issues, foreign exchange and net losses.

The Pune-based company, which posted a net profit of Rs 14.1 crore for the third quarter ended December 31, 2009, after consecutive losses of two quarters and heavy mark to market (MTM) losses in the previous financial year on a consolidated basis, is now in a position to reduce its debt burden to less than Rs 7,000 crore and post profits in near future, said Chief Operating Officer Sumant Sinha.

“Our overall debt level has come down to Rs 10,488 crore as of December 2009. Considering our group-level order book position worth $5 billion and the fact that debt includes a promoter’s loan of Rs 1,175 crore, we are in a position to reach a debt:equity ratio of 1:1 in near future from about 4:1,” he said in a telephonic interview with Business Standard.

Suzlon may convert the loans given by Tulsi Tanti and his family, the promoters, into equity, subject to regulatory approvals, he said.

Suzlon’s promoter group had cut their stake in the company from 65.83 per cent in March 2009 to 53.08 per cent by September 2009 to infuse funds into the company. Sumant said it was too early to predict to what extent the equity would go up after converting these loans into equity.

He said the company’s Foreign Currency Convertible Bond burden of about Rs 2,500 crore was not to be serviced immediately and these instruments have time of another two and a half years for pay back.

“In this scenario, our debt can be treated at about Rs 7,000 crore and this is within controllable limits. We will continue to reduce operating expenditure, improve operational efficiencies, reduce working capital and de-leverage our balance sheet even further,” said Sumant.

Recently, Suzlon had completed the first phase of debt recast by clearing outstanding loans worth $780 million for its overseas acquisitions of Belgian subsidiary Hansen and Germany-based REpower. The company also sold a 35 per cent stake in Hansen for $370 million and used a portion of it to service loans. Besides, it had taken a fresh dollar-denominated refinance loan of $465 million from State Bank of India.

Suzlon expects high growth from the Indian market in the coming years, as the domestic market is expected to grow 2-2.5 times from the current 1,500-1,700 Mw, thanks to government initiatives, said Sumant.

Suzlon currently has 60 per cent market share of the wind energy market in India.

China, which currently offers 10-15 per cent revenues to Suzlon Group, is likely to be another major market, besides the Europe, Brazil and Australia.

However, orders from the US — Suzlon’s biggest market — may be half of that for 2009-10 than in the previous year, an aftermath of economic slowdown.