Investors take the wind out of Suzlon

For investors, who stayed invested in the shares of Suzlon Energy since its listing on October 19, 2005, it has been turbulence for long now, especially last five years.

Since scaling a peak of ₹460 in 2008, shares of Suzlon have been ploughing new lows each passing year.

On Wednesday, it registered a new low of ₹13.75 on the BSE, but closed at ₹14.95 on the NSE.

Though the market gave a thumbs up to its acquisition of REpower (Senvion) in 2007 for €1.3 billion, the acquisition later turned sour, as slowdown hit the company very hard.

Suzlon has been going through multiple crises since then. The company’s working capital intensive business model, coupled with its global ambitions, led to massive accumulation of debt. It had also faced product quality issues with one of its clients in the US, which impacted the company’s volumes in the western markets.

Slowdown in the wind turbine markets in India further aggravated the pain that resulted in the company defaulting on foreign currency convertible bonds (FCCBs) and consequently went into corporate debt restructuring.

Arun Kejriwal, Founder, KRIS Research, said: “Great effort with respect to time and money has gone into reviving the fortunes of wind energy major Suzlon but to no avail. In becoming a global giant through acquisitions, it acquired huge debt on the balance sheet. Through selling most of these assets though it pared some debt it was not enough. It then roped in a domestic partner and has been making a valiant effort to turn around. So far nothing much has fructified.”

Despite being mauled at the bourses, some analysts are positive on the company going ahead.

The sale of Senvion, its German subsidiary, will help the company deleverage its stretched balance sheet.

Dilip Shanghvi and Associates has infused ₹1,800 crore through preferential allotment of shares at ₹18 apiece. Following the deal (on a diluted basis assuming FCCBs convert fully), Dilip Shanghvi and Associates will hold 16.7 per cent in Suzlon while the Tanti family will end up owning 17.5 per cent.

These developments will lead to a reduction of the rupee debt and provide much-needed working capital to the business.