Will bankers save Suzlon again?
Nevin John September 10, 2019
Over the last seven years, wind turbine maker Suzlon Energy has been in the eye of the storm after failing to meet its financial commitments. But lenders had given a long rope for survival-- restructured loans in 2013; time to sell-off assets to settle loans and facilitated Sun Pharma chairman Dilip Shanghvi to come and aid wind energy major headed by Gujarati businessman Tulsi Tanti. When many billionaires surrendered their businesses to the Insolvency and Bankruptcy Code (IBC) -- Tanti managed to scrape through the financial difficulties. The situation is not same as before.
The new issues started when Suzlon failed to make payment of principal of $172 million on outstanding foreign currency convertible bonds (FCCBs), due in July. It was reportedly negotiating with Denmark-based Vestas Wind Systems and Canadian investment firm Brookfield Asset Management for majority stake sale at that time. But both fell through owing to higher valuation that lenders led by State Bank of India (SBI) were demanding. Suzlon, in August, had offered a Rs 8,500 crore debt-resolution plan to lenders that was backed by Vestas again. The reports said that the offer would lead to lenders taking a haircut of 44 per cent.
Latest reports say banks are working on another debt restructuring in Suzlon after the buyers backed out. Suzlon's debt resolution and revival plan have never been dependent on any single option, the company informed bourses on Monday. In similar situations, banks have taken defaulting companies to the National Company Law Tribunal (NCLT) to start insolvency process, as the borrower failed to meet financial commitments. Suzlon had been claiming in the past that it hadn't defaulted on any of its loans and avoiding talks about insolvency resolution process in it.
The auditors said in the 2018/19 annual report of Suzlon, "The lenders have allowed continuation of operations, permitting usage of 90 per cent of cash inflows towards business requirements and have invoked the Intercreditor Agreement (ICA) mechanism under 'Project Sashakt' for resolution. The aforesaid conditions indicate existence of liquidity stress and material uncertainties that may cast significant doubt on the company's ability to continue as a going concern and consequently, the ability of the company to realise its assets and discharge its liabilities in the normal course of business."
According to the company, it incurred losses primarily due to lower volumes, foreign exchange losses, impairment losses, and finance costs which has resulted in negative net worth in the last financial year. The annual report said the company had defaulted in repayment of principal and interest payable to lenders aggregating to Rs 412.38 crore in the last financial year. It defaulted term loans, working capital loans and failed in making payments to certain overdue creditors.
In the last financial year, Suzlon posted a loss of Rs 1,537 crore on a revenue of Rs 4,978 crore. It had a consolidated net term debt of Rs 7,751 crore and a working capital debt of Rs 4,000 crore at the end of June. Suzlon has to pay back Rs 1928 crore in this financial year, Rs 835 crore in FY21, Rs 926 crore in FY22 and Rs 4483 crore in FY23 and beyond.
Earlier, Suzlon management sold off Gearbox manufacturing unit Hansen and German subsidiary envion SE (formerly REpower) for paying off the debts, which once swelled to Rs 17,000 crore. With 23 per cent stake, Dilip Shanghvi and family are currently the largest shareholder in Suzlon, who was roped in as a white knight to save the company in 2015. Tanti and family hold less than 20 per cent stake and, of that, more than 76 per cent has been pledged. The firm is valued just Rs 1,500 crore on stock market.