A turnaround is tough when the industry itself is facing several challenges, in terms of thinning government tenders and delayed payments. Photo: Bloomberg
A turnaround is tough when the industry itself is facing several challenges, in terms of thinning government tenders and delayed payments. Photo: Bloomberg

Suzlon: Little hope of recovery after recent default

  • Earlier this week, the wind turbine maker missed the deadline to pay $172 million due to foreign currency convertible bondholders
  • The Pune-based company reported consolidated net term debt of 7,761 crore and working capital debt of 3,380 crore as of March 2019

MUMBAI: For Suzlon Energy Ltd, once the poster child of India’s future in renewable energy, the company now seems likes it has little hope of turning around. For a stock that listed at 510 back in 2005, and then doubled in price within six months, the fall in the last decade has been sharp and persistent. Now, a possible buyout by Canadian investment firm Brookfield is the only glimmer at the end of the tunnel.

On Wednesday, the stock closed at 4.46 apiece on the BSE.

Earlier this week, the wind turbine maker missed the deadline to pay $172 million due to foreign currency convertible bondholders. The Pune-based company led by founder Tulsi Tanti, reported consolidated net term debt of 7,761 crore and working capital debt of 3,380 crore as of March 2019.

A turnaround is tough when the industry itself is facing several challenges, in terms of thinning government tenders and delayed payments from state power distribution utilities. The payment cycle for power private developers has worsened in states such as Andhra Pradesh, where the receivable position has increased to 8-10 months in March 2019 from 4-5 months from a year ago. In Tamil Nadu, the period stands at more than 9 months now, adversely affecting their liquidity profile of several wind power developers. For turbine makers like Suzlon, despite an impressive order book of nearly 2GW this fiscal, its dire financial straits coupled with poor demand in the sector is affecting its chances of hauling itself out of difficulty.

This isn’t the first time that the company has defaulted on bonds held overseas. In 2012, Suzlon defaulted on payments of $221 billion, which then forced the company into corporate debt restructuring. But the turnaround that once looked possible is still far away. At the end of March 2019, the company reported for the quarter of 294.64 crore. Total consolidated income from operations declined to 1,450.47 crore in the fourth quarter of 2018-19, compared to 2,189.18 in year-ago period. The company is reported to have signed a new inter-creditor agreement with its lenders this week.

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