Suzlon Energy on Death Bed?

Suzlon Bankruptcy

Suzlon Energy, India’s green poster child has finally fallen into a debt death spiral. The wind turbine giant is heavily debt-laden and is unable to honor its commitments. The company always had huge debt commitments

Suzlon which is India’s largest pure-play green company and one of the largest wind turbine manufacturers globally has faced challenges in the form of falling prices and massive supply glut by Chinese wind turbine makers. Suzlon had seen some operational improvement after reducing debt, through the sale of assets such as wind farms and its Chinese manufacturing operations in the past. But now the surmounting debt load has become the biggest threat to its existence. The company has been saved by lenders several times in the past few years. Senior creditors had supported the company by paying off foreign convertible debt earlier, but now more principal debt is due for payment soon. Suzlon has been resorting to selling off key assets to take off some debt load, but that has made servicing of the debt even more difficult.

The Indian stock market saw the fall of a large number of leveraged companies after the downfall of large industrial conglomerates like IL&FS and the Essel Group. The IL&FS default sent a shockwave across the whole financial system. Suzlon Energy had consolidated net term debt of Rs 7,751 crore in March 2019, and working capital debt of Rs 4,000 crore at the end of June. It also posted a loss of Rs 1,537 crore on revenues of Rs 4,978 crore. Suzlon might face bankruptcy if the company is not survived by any potential buyer. Creditors have already denied taking a 50% haircut in their debt to the company. In such a scenario, the only possible option available to the company might be going to bankruptcy court, NCLT.

Mr. Dilip Shanghvi and his family are the largest shareholders in Suzlon with a 23% stake. Mr. Tulsi Tanti and family hold less than 20% stake, of which more than 76% has been pledged. Suzlon had defaulted loan repayment aggregating to more than Rs. 400 crores in the last financial year.

“Banks will not be able to recover dues from Suzlon considering its abysmal performance. The company is going from losses to losses. The new buyers who came with enquiries want us to take haircut of over 50 per cent. Rather than taking the blame on us, it’s ideal to pass the case on to the bankruptcy court. We hope lenders will be able to achieve the same kind of loan recovery through resolution,” said a lender of Suzlon.

Source: Business Today

Also, read:

India’s Largest Wind Turbine Stock Moves Like a Yo-Yo on Default Fears and

India’s Green Poster-child Suzlon in Death Spiral as Debt Load forces it to Sell Key Assets