Shanghvi family to give up to Rs 3,700-crore security for Suzlon

Indian billionaire Dilip Shanghvi will provide as much as Rs 3,700 crore ($610 million) of security for Suzlon Energy Ltd. to help Asia's second-largest maker of wind turbines fill orders and return to profit.

The security from the Shanghvi family will make it easier for Suzlon to obtain more bank guarantees and letters of credit to ramp up its business, Sudhir Valia, executive director at the billionaire's Sun Pharma, said in a February 23 phone interview.

The Pune-based company's current working capital level is 50 per cent of its order book, said Valia, who is Shanghvi's brother-in-law. Suzlon is planning to build new factories as it seeks to recover from India's biggest convertible-bond default two and a half years ago.

 

The company said earlier this month it will sell a 23 per cent stake to Shanghvi's family for Rs 1,800 crore, weeks after it agreed to offload its German unit for euro 1 billion ($1.1 billion). The priority is for Suzlon to stop posting losses, and additional bank funding would help the company cover fixed overhead costs by boosting its capacity utilization, according to Valia. The security provided by the Shanghvi family will give "comfort" to Suzlon's creditors that they will be repaid, he said.

"If the company fails, we are still there," Valia said. "The bank won't lose the money."

Suzlon has reported annual losses since the year ending March 2010, according to data compiled by Bloomberg.