Suzlon looks to exit CDR by first half of FY18

Says exit from the CDR cell is needed for its ratings

Wind energy turbine manufacturer Suzlon Energy says it hopes to exit the corporate debt restructuring (CDR) cell, which it had to enter due to a huge loan burden, in the first half of the next financial year. This is beyond the earlier expected March 2017 timeline.

"We are trying to exit as quickly as possible. There is a process in the banking sector; we have already initiated the process and since we have number of lenders and a set process with each lender, we believe it should likely to be concluded sometime in the middle of the next financial year," said Kirti Vagadia, group chief financial officer.

On not meeting the March timeline, he added, "This is clearly due to the procedural part and no roadblocks." As of December 2016, the net term debt was Rs. 6,538 crore, excluding its foreign currency convertible bonds, according to the company's investor presentation.

In April 2013, Suzlon Energy's shareholders approved a $1.8 billion (Rs 12,000 crore) corporate debt restructuring package. Higher debt numbers, slowdown in the wind turbine market and in the economy had hit the company.

With the sale of German subsidiary Senvion for to US private equity firm Centrebridge for ? one billion and a Rs 1,800 crore investment from Dilip Shanghvi & Associates (DSA), it has been able to chart a turnaround. "On the volume side, we ended FY16 at 1,131 Mw and in the current years, in the first nine months itself, we have crossed one Gw (1,000 Mw), with the last quarter left. This growth journey is on a solid foundation, including capital availability, available for us for a sustainably longer period. On technology we continue to remain ahead," Vagadia said.

Suzlon's exit from the CDR cell is needed for its ratings. "The rating strengths are tempered by negative net worth due to past losses, higher reliance on external funding, majorly in the form of non-fund based line of credit, for the overall execution of orders and susceptibility of the business to policy change and macroeconomic slowdown. The ability of Suzlon to further scale up the operations to envisaged levels, with improvement in (operating earnings), garnering of need-based support from DSA and exit the CDR without any liquidity pressures in the short term are the key rating sensitivities," Pawan Matkar from CARE Ratings wrote in an end-October report, revising the company's long-term borrowings from BBB negative to BBB.

Matkar further says, "The revised ratings take into account the turnaround in the operations characterised by a two-time increase in turnover and positive (operating earnings) in FY16, after three years of continuous loss."