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Wind turbine maker Suzlon has defaulted on the payment of the principal amount of ₹1,169 crore ($172 million) due to its Foreign Currency Convertible Bondholders (FCCBs).
In a filing with the exchanges, Suzlon said it has not made the payment of the principal amount, which was due on July 16. The outstanding payment was part of total bond issuance of $546.91 million. “The company is working on a holistic solution for its debt and continues to be in discussions with various stakeholders in relation to its outstanding debt (including the bonds),” Suzlon said in a stock exchange filing.
This default comes at a time when the company is understood to be in talks with Canadian investor Brookfield to sell a majority stake in the cash-strapped renewable energy company, founded by Tulsi Tanti, once a poster boy for the sector.
But this cash infusion may happen only when there is a considerable amount of debt waiver by lenders, including FCCB holders, according to industry watchers.
This also opens up negotiation possibilities to restructure the debt. But if the talks fail, the lenders may be forced to initiate proceedings under the Insolvency and Bankruptcy Code (IBC). It is estimated that India has $53 billion of stressed debt or NPAs in the power sector, but mostly in thermal and coal power plants.
As per its balance sheet, Suzlon had a net term debt of ₹7,761 crore. It also has working capital debt of ₹3,380 crore. For the financial year 2019, it reported a net loss of ₹1,537 crore and revenues of ₹4,978 crore.
Suzlon had earlier said that it intends to reduce debt by 30-40 per cent, through strategic initiatives.
Further, as per its balance sheet, it has reduced working capital gradually over the last five quarters. The working capital requirements have come down from ₹2,780 crore in the fourth quarter of 2018 fiscal to ₹1,552 crore in the fourth quarter of 2019 fiscal.
Not the first time
This is not the first time that Suzlon has defaulted on its payments. In 2012 too, Suzlon Energy defaulted on FCCB repayment, after its bondholders rejected an extension plea. In 2015, Dilip Shanghvi, Founder and MD of Sun Pharma, tried to play the role of a white knight for Suzlon when he bought 23 per cent stake for ₹1,800 crore. The company’s market value was then at a high of ₹10,900 crore.
On Tuesday, Suzlon shares were down 3.11 per cent at ₹4.67 a piece, bringing down its market cap to ₹2,484 crore.
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