(PTI) Sailing in neck-deep debt for over a decade now, largest wind power player Suzlon Energy, which lost its charismatic founder-chairman Tulsi Tanti recently, is on a strong revival course and is confident of returning to its boom years of pre-2007.
The Pune-headquartered green energy pioneer was founded in 1995 by Tulsi Tanti -- whose untimely demise on October 1 following a cardiac arrest left the firm shocked as he was driving the revival efforts.
The company is on a de-leveraging spree on the back of a recent ₹2,800-crore refinancing from state-run REC along with Ireda and a ₹1,200-crore rights issue that opens on Tuesday.
The company will repay ₹1,000 crore to REC from the rights issue proceeds. Of the ₹2,800 crore 20-year REC loan, only ₹800 crore is working capital facility and is priced at 19 per cent.
"Our problem is not lack of product, technology or servicing capabilities or orders. Even in our worst times we've been servicing all the turbines we installed and now as much ₹1,800 crore of our total income of ₹2,000 crore comes from servicing.
"Our real and only problem is financing," Ishwar Chand Mangal, chief executive for services division, Suzlon Energy, told PTI during a visit to the Survada village near here where the company is installing 20 turbines atop 160-metre high towers, making them the tallest in the country, hours before Tanti's untimely death on October 1.
Explaining the problem further, he said "we have to furnish 50 per cent of the advance booking amount as bank guarantees to secure a contract, which we are unable to do as banks are unwilling to lend us even working capital. But with the recent ₹2,800-crore REC refinance of bank loans, we're out of the woods for sure and soon we should be back to our boom days of pre-2007."
The REC and Ireda loan has refinanced ₹3,000 crore loans from an SBI-led 16-bank consortium. Post-refinance, banks will still hold 5 per cent equity (down from 10 per cent) of the company for their remaining ₹3,500-crore exposure.
"Since the REC credit line comes with a rider of further reducing debt, which we should be able to do with rights issue, we'll be on course to return to our boom years of pre-2007 sooner than later," Mangal added.
Mangal, who has been Suzlon since its second year of operations, later told PTI that the company is confident of completing the rights issue even though it lost its founder.
"Right from the beginning, Tanti believed in hiring professionals and empowering them to run and grow the business. Team Suzlon is highly competitive and experienced enough to take the business forward and we've very strong systems and processes," he said over the weekend.
Also, the strategy for the next three-five years is well laid down and the critical challenge of debt management is almost through, he added.
"The late founder mainly focused on finding more market opportunities through various efforts on getting the right policy and regulatory framework in place," Mangal pointed out.
Suzlon will have only around ₹1,800 crore net debt left after the rights issue and the company is confident of retiring this remaining debt given the almost ₹2,000-crore annual income, he said.
Suzlon's troubles began when it bought REpower of Germany in June 2007 for USD 1.6 billion in an over-leveraged deal, months before the collapse of Lehman Brothers in September 2007, which soon pulled the global economy into a deep recession. Months later, orders began to dry up, choking its cash flow.
This left the firm with a debt mount of ₹19,000 crore at its peak (with the REpower deal, Suzlon was the world's largest wind power company). As the debt was not being serviced, banks were forced to convert their dues into equity by 2013 and for years, it was majority owned by lenders.
Reeling under debt, in 2015 Suzlon sold REpower, which was later renamed as Servion, to a US fund for a little less than its buy price.
Being the largest player, Suzlon controls over 30 per cent of the operational domestic wind turbine market, managing/servicing 13,500 MW across over 9,000 wind turbines, and also over 6,000 MW overseas. Across its 20 plants, it has an installed annual capacity to manufacture turbines of 3,100 MW but is able to produce only around 300 MW per quarter due to financial crunch.
On October 7, Suzlon elevated Vinod Tanti, the younger brother of the late founder, as chairman and managing director.
A day after Tulsi Tanti's death, it had said it would go ahead with the rights issue as planned which opens on October 11 and closes on October 20. The board also appointed another brother Girish as executive director/ vice-chairman and the late Tanti's son Pranav as an additional director.
Mangal said demand is not at all a problem for Suzlon but it is execution, given its financial crunch.
"See, we (India) must add 500 GW of green energy by 2030, of this 100 GW should be wind. Then there is a 30,000 MW of old thermal power replacement. Another tailwind is doing away with e-reverse auction," he said, adding despite financial difficulties, Suzlon is installing around 800 MW annually and is now sitting over an order book of over 700 MW.