Suzlon Plans To Reduce Debt Burden

The shares of Suzlon Energy, today closed at Rs 11.10 on BSe (up by 12.23%). This may be on account of their plans to raise funds by selling shares in its subsidiary Senvion to raise Rs 10,000 crore and listing it on London Stock Exchange (LSE).

Suzlon Energy has been reporting losses since last three years and it has a total debt of around Rs. 14,971 crore and negative working capital of Rs 1937.88 crore till September 30, 2013. The company has total FCCBs worth USD 475 billion including USD 209 million (Rs 1,289.78 crore) which they defaulted to pay in October 2012 and another two FCCBs worth USD 175 million and USD 90 million due after 2014. The company is planning to sell some of its assets from national as well as from international market to reduce the debt burden. Hence, it will sell shares in its German subsidiary Senvion to raise around Rs 10,000 crore by listing it on the London Stock Exchange for which it will have to dilute 25% stake in Senvion SE, a wholly owned subsidiary of Suzlon group company.

Senvion SE is one of the leading international manufacturers of onshore and offshore wind turbines. Senvion is ranked as the second largest wind company in Germany with 10 GW in cumulative global installations and with the help of this, the group has crossed 23 GW in global installations. If Senvion is listed on LSE, it will help the company to raise capital for further development and can enhance its international presence.

On the financial grounds, Suzlon has not performed well. The company has been posting losses since last seven quarters . During Q3FY14, the company has reported a topline growth of more than 24% on yearly basis. It also posted a loss of Rs. 1075.25 crore as against Rs. 1154.53 crore in Q3FY13. The total expenses of the company during Q3FY14 was Rs. 5735 crore as against Rs. 4563.47 crore during Q3FY13. Though the total expense has increased but as proportionate to total sales, it has reduced. On yearly basis the total expenses during Q3FY14 has reduced due to reduction in cost of raw materials by 5% to Rs 3157.62 crore, depreciation by 8% to Rs 186.28 crore and the tax of the company has plunged by more than 106% to Rs -8.68 crore. Due to this, the company has managed to reduce its losses for this quarter. The finance cost of the company has increased by 12% on yearly basis to reach Rs. 510.29 crore in Q3FY14.

The company is also planning for corporate debt restructuring (CDR). If this happens, the company will get some relief as interest payment. It will also be able to focus on its core business thereby helping it to turn into a positive one. The company has informed that it is exploring various options to re balance its capital structure and also it will acquire US based SPV company (Big Sky) owning certain assets which were sold by Suzlon to Big Sky, which were partially financed by Suzlon through a loan.