The Hindu Business Line : Suzlon loses wind after reporting higher losses

Suzlon, world’s fifth largest wind turbine maker, is increasingly reliant on the Hansen stake sale and a debt moratorium to extricate itself from the debt financed mess. This realisation is a cause of concern for the market.

Suzlon is the largest shareholder of Hansen and part of the advisory board.

However, Mr Bhargav Buddhadev, an analyst at Noble Group, said if Suzlon is able to get a debt moratorium, it has the cash to fund its operational expenses (including interest expenses).

“Suzlon is sitting on cash of Rs 900 crore and is expected to generate Rs 3,100 core before payment of indirect expenses and interest expenses. We expect gross profit of Rs 2,700 crore in H2 and a release of Rs 400 crore from working capital management in H2-10. As against this the indirect expenses plus interest expense liabilities in H2-10 stand at Rs 1,700 crore. Hence, the announcement by the company on re-financing of debt in this quarter is likely to put to rest whispers regarding bankruptcy for now,” he said.

“The refinancing entails a moratorium period of two years and relaxation of covenants. So we think that the worst is over company.”

Orders for the wind power equipment maker, particularly from North America and Europe, have been declining this year. According to a recent report by MAKE Consulting, orders for all manufacturers have dropped by 56 per cent till June-end.

According to Citi Group, the expected recovery in the wind power market in the US has failed to materialise this year.

UBS expects a recovery in orders for Suzlon in the first half of 2010. Citi, which rates Suzlon as “high risk”, feels that the company has done enough to prove that it may be down but not out. It says in a recent note that FY09/FY10E earnings are not a true reflection of the earnings power that Suzlon has created over three to four years.

“FY09/FY10E earnings are deflated by: (1) huge interest costs and (2) massive amounts of provisioning, which might be lower going forward”.

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