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Tulsi Tanti bets again on Kirti Vagadia to boost Suzlon Energy

According to reports, back in 1995, Kirti Vagadia was working as an independent chartered accountant in Ahmedabad. As a rank holder CA from 1988 (top 50 in both levels), Vagadia had worked with a tube maker before launching his solo career.

In between he had also helped a start-up in its listing. Though working in Ahmedabad, Vagadia’s family was from Rajkot and on a visit Vagadia went up to meet Tulsi Tanti, then a Rajkot-based textiles businessman. “I didn’t meet Tulsibhai for a job, in fact the reason for the meeting was something very different, but I came away with a job offer,” Vagadia says.

He joined Tanti in January 1995. “Exactly 100 days later Suzlon Energy was incorporated.” At that time Tanti was looking for a solution to the power problems his textiles mill in Surat faced — and wind power seemed to be the answer. He was also looking for a man who could help him raise money. And Vagadia did raise money as Suzlon the wind turbine maker grew in India and acquired abroad to become one of the largest wind power companies in the world supplying equipment and also managing wind farms.

Nineteen years later, for Vagadia (now Group head finance) and Suzlon life seems to have turned a full circle. Only, like the Olympics logo, the circles are more than one and complicated. Both Vagadia and Tanti have shifted base to Pune and spend many days in a month abroad managing their global business — the fifth largest wind turbine maker in the world.

Together they have also seen a lot of downside over the past five years. Suzlon’s shares touched a low of Rs 5.72 in August 2013. There has been a smart recovery at the bourses after Suzlon announced encouraging results for the January-March 2014 quarter. However, at Rs 34.65 (on Friday), and after hitting the upper circuit on the bourses for five consecutive days, it is still below one-tenth of its all-time adjusted high of Rs 426.46 (January 2008, adjusted for a split and a rights issue).

The Suzlon scrip has also got a Modi sarkar boost of its own. “The expectation that the new NDA government will put emphasis on renewable energy and sort out the bottlenecks has buoyed the prospects of the wind energy sector. Suzlon being the largest player is expected to be an obvious beneficiary,” says Sudip Bandyopadhyay, managing director of brokerage Destimoney Securities.

Bandyopadhyay, however, advises caution as he says: “Concrete steps are yet to be announced by the government and the Suzlon scrip price has run up quite a bit.”

Well laid out plans and expectations can often go awry. After Suzlon hit its alltime high in January 2008, it also saw its world turn upside down. There was an issue of cracked rotor blades of turbines in mid-2008 and as an economic downturn hit, orders dried up by the end of the year.

Suzlon had just completed the acquisition of German wind power major REpower, now renamed Senvion, in 2007 after a straining battle with Areva; this came quick on the heels of the acquisition of Belgian turbine gearbox maker Hansen the year before.

The timing of the global credit crisis could not have been worse for Suzlon and many other Indian companies like Tata Steel or Hindalco that had acquired huge assets overseas. At Suzlon, questions were raised about management bandwidth, too.

An investment banker who assisted the company at that time pointed at Vagadia’s lack of experience in managing global acquisitions and their integration with Indian operations. Vagadia headed finance at Suzlon Energy at the time.

Tanti had to induct fresh manpower. In 2008 Sumant Sinha joined the company as chief operating officer. And later in March 2009 Vagadia actually took a backseat in the finance function, taking on a group role, while Tanti inducted Robin Banerjee of Essar Steel as chief financial officer.

Soon Banerjee became the face of the company. It worked for a while. In 2011, the company had three quarters of profits, spread across two financial years. However, Suzlon has not been able to post an annual consolidated profit since 2008-09. Sinha left in 2010 and Banerjee two years later. Tanti had to fall back on Vagadia who took over the finance function again as CFO in April 2012.

Later that year the company defaulted on its foreign currency convertible bonds. In the 15 months since the default, Tanti and Vagadia seem to have performed a miracle. The company has gone through a corporate debt restructuring programme and its proposal got the approval of all the banks in April 2013.

In May 2014 Suzlon announced cashless restructuring of its foreign currency convertible bonds after an agreement with an ad hoc committee of bond holders. A general meeting with bondholders is scheduled for July 9. Vagadia says: “Each day in the past 19 years has been a great learning experience.” But what was the key to this almost miraculous turnaround?

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