Suzlon to Exit Debt Revamp Plan, Seeks to Raise Equity for Unit

  • Company will exit restructuring program by March 31: Tanti
  • Tanti says plans to seek equity investments for SE Forge unit

Suzlon Energy Ltd., India’s biggest convertible bond defaulter, will exit a corporate-debt restructuring program offered by its lenders before March 31 and plans to seek equity investments for its SE Forge Ltd unit, Chairman Tulsi Tanti said in an interview Thursday.

Shares of the the Pune-based company, India’s second-largest wind turbine maker, climbed the most intraday in about four months, ending four days of losses and paring the year’s slump to 18 percent. Suzlon has been working under the nation’s debt restructuring rules to repair its finances since it defaulted in 2012. It returned to profit for the full year for the first time since 2009.

“This financial year we’re exiting CDR, and after that we see large global financial investors re-enter the stock,” Tanti said at Bloomberg’s office in Mumbai. “Now that we are exiting CDR, many restrictions will go out and we will have access to the debt market.”

The company’s turn in fortunes have been helped by the sale of its German unit to funds managed by Centerbridge Partners LP for 1 billion euros ($1.1 billion) last year and an investment by Billionaire Dilip Shanghvi. 

Shanghvi and his family agreed to buy a 23 percent stake in Suzlon for 18 billion rupees last year, throwing a lifeline to the indebted company. Dilip Shanghvi Family and Associates would provide security for any shortfall in funding from banks over the next two years, Tanti said at the time. The investment in 2015 came less than a month after Suzlon agreed to sell the German unit to pare borrowings.

Suzlon defaulted on $209 million of dollar-denominated convertible bonds four years ago.

“Operationally they need to perform very well, they should be able to repay their debt as per schedule and we need to see a shuffle in their management as well,” said Jaisheel Garg, an analyst at Way2Wealth Brokers Ltd. in Mumbai. “These are the concerns that Suzlon still needs to address.”

The company’s shares surged as much as 8.3 percent on Friday before changing hands at 17.10 rupees as of 11:18 a.m. in Mumbai. It has climbed about 33 percent since this year’s low in March, outpacing the S&P BSE Sensex’s 13 percent advance.

Equity Investment

The company is looking to bring in private equity or list its SE Forge unit, Tanti said, declining to give any details on valuations. The unit exited the debt-restructuring program and is operationally profitable, Group Chief Financial Officer Kirti Vagadia said in February. Vagadia said in 2013 the company was looking to sell down this unit to cut debt.

Suzlon has a target to reduce net debt to zero within five years, Tanti said. The company reduced its consolidated gross debt by 65.7 billion rupees ($983 million) to 112.4 billion rupees in the year ended March 31, according to a company presentation on July 15.

It is in talks with banks to replace part of its rupee debt and monetize future receivables, Tanti said. The company had rupee term debt of 30.33 billion rupees and foreign-currency term debt of 46.48 billion rupees as of March 31, it said in a May presentation.

“I can optimize my interest cost by optimizing certain debt,” Tanti said, noting that about 30 percent of the debt is in rupees with the rest in U.S. dollars. “We will replace rupee debt and reduce cost.”

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