Stocks

Suzlon Energy shares up 9.76 per cent

Our Bureau Mumbai | Updated on January 07, 2020 Published on January 07, 2020

An inter-creditor agreement was signed by the company's secured creditors in July to find a solution to Suzlon's debt crisis

On the back of a possible debt recast, Suzlon Energy shares were up 9.76 per cent in BSE.  It was amongst the the top gainers, and is currently trading at Rs 3.60.

Suzlon's shares are rallying as the company is considering to restructure $1.68 billion of new debt, which translates into a 68 per cent haircut, according to reports.

An inter-creditor agreement was signed by the company's secured creditors in July to find a solution to Suzlon's debt crisis.

The efforts seem to have enthused the markets. Suzlon Energy's stock has moved up almost 50 per cent in the last five days on the back of these developments. Suzlon, founded by Tulsi Tanti, once a poster boy for the Indian renewables sector is bearing the brunt of a slew of bad investment decisions, in pursuit of fast growth.

Suzlon took on excessive levels of debt to acquire companies which were bigger than itself, tried to capture new markets, while compromising on quality and customer service.

This resulted in a pile up of loans amounting to Rs 11,300 crore, which includes a defalt on payment of principal amount of Rs 1,169 crore. Suzlon owes this to Foreign Currency Convertible Bondholders (FCCBs). The outstanding debt for fiscal 2021 -2023 and beyond totals Rs 835 crore, Rs 926 crore and Rs 4,483 crore respectively. Over the last three years, Suzlon Energy’s revenue dropped 34 per cent per year as debt levels went up.

If the latest round of restructuring comes through, this would be the second such instance for Suzlon. In January 2013, a consortium of 19 banks, led by SBI agreed to restructure Rs 9500 crore of Suzlon’s domestic debt, through a corporate debt restructuring (CDR) package. The CDR involved a 10-year repayment plan with a reduced interest rate, involved a two-year moratorium on principal and term-debt interest payments, fresh working capital loan of Rs 1800 crore, with a six-months interest moratorium and monetization of assets to generate cash to repay debt.

Additionally, the package also included promoters bringing in Rs 250 crore of fresh equity. Promoters, which include Tanti family hold 19.82 per cent in Suzlon. Additionally, the promoters have pledged 76.34 per cent of their shares in teh company. But absolute management control was to remain with the Tanti family.

“A new investor will negotiate hard on the terms and conditions,” said Krrishan Singhania, Managing Partner, Singhania & Company, a law firm.

For Suzlon, the market is also looking bleak. Wind energy tariff went down to Rs 2.43 per unit and ratings agency CARE expects capacity addition to remain subdued at 3.0 GW during FY2020 as projects bid out under competitive bidding are running behind schedule commercial date.

Published on January 07, 2020
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