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Worst is over, still its early to predict the future: Tulsi Tanti, Chairman and MD, Suzlon

According to reports, buffeted by the global economic slowdown, accusations over “low quality” wind turbines and financial woes, the world’s sixth-largest wind turbine maker is trying hard to ride out the bad times.

Last week, the Pune-based company reported a second consecutive profitable quarter after posting losses in all quarters since December 2009. And, after all, despite new challenges it is confronting in emerging markets – where it fell back on in the past few years to weather the storm in the US, Europe – it is still the market leader in countries such as India and Brazil besides Australia. It is facing complaints in India over technical problems with its turbines and competition from competitors such as Gamesa, Vestas, GE and others, but the company is making all-out efforts to pare its $2.8-billion debt.

Sure, Suzlon was lucky to get a refinancing deal from a consortia of 24 banks; as per the agreement, Suzlon will start repaying debt from 2012-13, over a six-year period. Tulsi says his company was “on the right track” to meet debt repayment obligations.
“It is remarkable,” says Tulsi about the refinancing deal. He, however, denies any pressure from the lenders to sell its stake in German gearbox maker Hansen Transmissions to raise money for repaying debt and for buying out the rest of REpower it doesn’t already own. “No. We have said for some time that when the time was right we would look to divest, and the 95% premium on the share price clearly reflects this was not a deal done under pressure,” he says. Suzlon bought Hansen in 2006 and REpower in 2007. Now it owns more than 95% in REpower, which, Tanti calls the “jewel in Suzlon’s crown”.

“See, all companies go through all these phases, the growth phase, the crisis phase and the stability phase. We aren’t the first one to go through these phases,” Tanti told ET on Sunday. He wants to position his “jewel” – because it is the company that makes the world’s largest commercially available, 6.15 MW offshore turbines – in developed markets and Suzlon in emerging markets.

“Other companies may soon start making it (turbines similar to REpower’s), but right now, REpower is the only one that makes them,” he says. According to German laws, Tanti can transfer technology from REpower only after acquiring a full stake in the company. “That process is on and the result shouldn’t be a surprise for anyone. It is well-defined committed process. Valuation has been done (-63 million for the rest of REpower) and an AGM has to approve the buy,” he says.

“REpower has no debt. It is sitting on a pile of -300 million in cash,” he says. While research firms such as Macquarie say Suzlon can easily repay $650 million in debt principal due in 2012, thanks to cash from REpower after it buys 100% stake and proceeds from the Hansen sale, they are worried “over the medium-term outlook in India due to potential regulatory changes and increased price competition”.

Analysts such as Arvind Mahajan of KPMG say no wind turbine maker in India can forge ahead and win the confidence of investors unless it devises a strategy to take on global players in emerging markets – the same ones that competed with Suzlon in Europe and the US, a market where it faced the heat over faulty turbine blades.

In India, Suzlon is losing its market share to these new entrants. For his part, Tanti hopes to bank on early-mover advantage and his powers of persuasion to either retain its market share or expand. “Suzlon is nimble and entrepreneurial…we emerged as a leader in just 15 years, starting in the Indian market where all the major players were already present when Suzlon was only just beginning – and we have been market leaders in India for over a decade.” Again, he adds, “our bids are competitive in all markets.” He refuses to disclose more, saying, “for reasons of commercial confidentiality it would be inappropriate to comment further”.

Says Tanti: “We have improved our performance over the past five quarters, and delivered a profit in the last two quarters. We have maintained a strategic focus on growth markets, and worked on improving our performance across all key operational parameters – and this is delivering … we are doing what we said we would do: focusing on orders, optimising the balance sheet, marketing new products and consolidating the business.”

Many stock research firms have upgraded Suzlon. Citi has upgraded its stock to buy from hold, at a time when globally, stocks of renewable energy companies are doing badly on the bourses.

It is indeed a big departure from at least a year ago: from appearing like it may go bust, Suzlon now seems to head for surviving odds. “See, I have started getting good reviews from the media, the same ones from which I got negative publicity,” Tanti says. But analysts insist that as competition in markets such as India hots up, one has to wait to see which way the wind is blowing. But Tanti says, “We believe the worst is behind us.” It appears so, for the time being.

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