Suzlon Survives, With Debt Recast From Bankers

Troubled Wind Energy manufacturer Suzlon has informed the stock exchanges about a debt recast approved by its lending consortium, led by the State Bank of India. The total amount involved has been reported to be close to Rs 14,000 crores. The firm has been in financial trouble for quite some time, a situation that has hampered its opportunities in the wind energy space as it has grown, though even that growth might be stalling now. One of the reasons has been the intense competition in the sector now, with margins squeezed despite seeming growth in installations and orders.

The Tulsi Tanti promoted firm had been a flag bearer of the manufacturing opportunities renewables offered, until it all went to pieces after big acquisitions, and changed market conditions. The firm had last made a major default in 2012, on its foreign borrowings, till its fresh default last year.  In 2015, well known Pharma leader, Dilip Shangvi had also acquired a 23% stake in the firm with an investment of  Rs 1,800 crore, giving the stressed wind turbine maker a fresh dose of fund infusion. However, the management control had remained with Tulsi Tanti.

Shanghvi was also to collaborate with Suzlon for developing a 450-Mw wind farm in a 50:50 joint venture .

“The resolution plan has been unanimously approved by the consortium of lenders. The company is working on finalising various definitive agreements with the lenders,” Suzlon informed the bourses on Monday.

Back in June 2019, the Reserve Bank of India, India’s central bank, had given directions to banks to consider a debt recast for many firms, including Suzlon.

While no details have been provided yet, most recasts in India have involved rescheduling repayments where possible, or alternatively, converting a significant part of the debt to equity, and a contribution of promoters equity too. With a new bankruptcy law in force now, it has also led to may promoters losing control over their firms, notably the Ruias of Essar Steel, and many more.

The board of Suzlon Energy had approved the resolution plan last month, following which it was approved by shareholders.
The company board also has an enabling resolution to issue shares or equity linked instruments worth Rs 1,000 crore, which may be raised later if required.