Regulator probes Suzlon’s accounts

Suzlon Energy Ltd on Tuesday said the markets regulator is conducting a forensic audit of its accounts to check for violations of securities market regulations or Companies Act rules.

The Securities and Exchange Board of India (Sebi) informed Suzlon of the audit in a letter on Monday, the company said in a stock exchange filing. The Sebi letter stated that the appointment of the forensic auditor is in the context of disclosures of financial information and business transactions.

Suzlon, India’s largest renewable energy equipment maker, said that being a global company with strong internal controls and an effective audit system, it believes it has been and is compliant with laws and regulations. “The company is committed to extending its fullest cooperation in the completion of the forensic audit,” Suzlon said.

This is not the first time Suzlon has come under regulatory scrutiny. In 2018, Sebi imposed a penalty on the company after conducting an investigation, accusing chairman Tulsi Tanti and executive director Girish R. Tanti of violating listing regulations and breaching corporate disclosure norms to prevent insider trading between April 2006 and March 2009. Sebi found Suzlon did not disclose an “option” with a certain buyer to cancel one or more phases of a project, which had a significant bearing on its operational performance and stock price. The Sebi investigation revealed that during 2006-09, orders worth around ₹5,764 crore, which were announced by the company through corporate announcements on the exchanges, were either not opted for by the clients or were not executed.

Suzlon’s shareholders were not informed about this. Several non-fulfilment of orders were not announced by the company, the Sebi investigation showed.

Sebi’s latest scrutiny follows a major debt restructuring exercise undertaken by lenders of Suzlon after years of poor financial performance.

As part of the restructuring plan, Suzlon’s promoters infused ₹392 crore into the company simultaneously, according to a company statement in July 2020. Interest on the company’s term debt was reduced substantially to 9%, repayable over 10 years starting 1 July 2020. The balance debt of secured consortium lenders was replaced by 0.01% optionally convertible debentures of the company and 0.0001% compulsorily convertible preference shares of its subsidiary redeemable or convertible in 20 years, according to the debt restructuring plan.

The company has been incurring losses, resulting in a series of defaults during fiscal 2020. Its largest default was in the repayment of more than ₹3,600 crore to State Bank of India, which had extended loans to the company through a consortium. The company also defaulted on loan repayments to Punjab National Bank, Indian Overseas Bank, IDBI Bank, Central Bank of India, Bank of Baroda and ICICI Bank Ltd, among various other banks.

The loans included funds-based working capital, non-fund based working capital, term loans and standby letter of credit.