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Suzlon bets on debt recast, unit stake sale to turn around

According to reports, Suzlon Energy’s chief financial officer Kirti Vagadia remains optimistic about the debt-laden firm as the debt recast approved by banks outweighs the gloom generated by the three years of losses, including its biggest quarterly loss of Rs1,154 crore in the December quarter. The wind turbine maker aims to raise Rs2,200 crore from stake sale of its components manufacturing subsidiaries, which the company refers to as non-critical assets, in the next 12-24 month. It also hopes to recover payments worth aroundRs1,100 crore from its US client Edison International to improve its liquidity position.

“Suzlon has been operating in an abnormal environment in FY13. Despite a strong order book, we have not been able to deliver orders due to liquidity constraint,” Vagadia said. “The debt recast approval underscores our long-term viability and paves way for normalisation of business. It gives us the much-needed headroom to focus on execution and bring business back on track,” he added.

The Tulsi Tanti-promoted firm, which has been severely hit by the double whammy of huge debt and slowdown in business, piled upRs14,000 crore in debt and has reported losses for the past three years.

To turn around, it needs to accelerate revenue growth, but the lack of funds curbed its ability to deliver orders and book sales despite the company’s order book being worth Rs41,546 crore. The fund-raising measure planned by Suzlon, along with the twoyear moratorium on principal and interest payments and additional working capital limit approved by the bank, would improve the company’s cash position and drive execution.

“We believe that mid-term sector outlook remains strong. Our order book is strong and our order booking momentum has accelerated since we got approval for the corporate debt restructuring. We have booked new orders worth 728 MW since we got the debt recast approval,” Vagadia said.

“Next year, our focus would be on execution. We hope to sell our noncritical assets in the next 12-24 months and rationalise our manufacturing facilities globally to optimise costs,” he said.

Suzlon has identified non-critical arms like SE Forge, SE Electricals and its China manufacturing units to for stake sale or complete sell-out. Although some of its bankers are believed to have demanded a stake sale in its German Subsidiary REpower Systems, the company has repeatedly denied any plan citing it is a ‘jewel in the crown’ and critical for company’s growth.

“Banks have put forward some clause for fund raising, but how we do it has been left up to us. REpower is our critical asset, in fact most critical asset, and we don’t intend to sell it,” Vagadia said.

The banks have also put forth a clause for the promoters to infuse Rs250 crore in the company, which includes Rs125 crore by March and the balance Rs125 crore in the next 12 months. “They have already infusedRs62 crore by December and they are confident of investing the balance on time,” Vagadia said.

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