Will Debt Restructuring lead to a bright future for Suzlon Energy Ltd. (NSE: SUZLON)

Suzlon Energy Ltd., an Indian wind turbine manufacturer based in Pune, India. Formerly ranked by MAKE as the world's fifth-largest wind turbine supplier has been on a rough road for a decade now due to the debt burden leading to an unsustainable financial position.

As many of you already know Suzlon Energy Ltd. went through a debt restructuring for the second time. Yesterday, the debt restructuring process was finally completed. As part of the restructuring plan, Suzlon Energy Ltd. approved the allotment of 7.86 Cr equity shares of the company to 860,41,11,198 with a face value of Rs 2 each, Convertible Bonds due 2032 having a face value of USD 320 each at a conversion price of Rs2.61 per equity share with a fixed rate of exchange on the conversion of Rs74.8464 to USD 1.00.

Post Allotment the paid-up capital of the company is Rs 1661 Cr with 830 Cr equity shares of Rs 2 each. Currently, the stock is trading at a price of Rs. 2.85 on NSE and Rs. 2.90 on BSE. To understand the current position of Suzlon we need to look pre-restructuring & post-restructuring of the debt.

Suzlon Energy agreed to repay the sustainable debt of Rs 3,600 crore in the first 10 years. The remaining portion of the debt was proposed to be paid over 20 years by converting it into optionally convertible debentures (OCDs) and compulsorily convertible preference shares (CCPS).

  • The term debt reduced substantially with interest of 9% per annum repayable over 10 years starting July 1, 2020.

  • The balance debt of secured consortium lenders replaced by 0.01% OCD of the company and 0.0001% CCPS of its subsidiary redeemable or convertible in 20 years, the release further said.

Earlier the due loan amount was Rs.13,556 Crores, Post restructuring due loan amount is Rs. 7,970 Crores which has an NPV (Net Present Value) of Rs. 4,431 Cr., around 60% haircut for financial creditors.

Let's have a look at the new shareholding pattern of the company. As of June 2020, the company issued 51.2 Cr. equity shares, no change in the shareholding pattern of promoters currently they hold 18.94% of the company.

Suzlon Energy Ltd. has maintained market leadership for over two decades with a cumulative market share of 34%, Also it holds the Largest wind turbine fleet under maintenance in India of 12.8 GW which is the 3rd highest in India Power Sector. Currently, the company holds an order book of 867 MW, the worth of Rs. 4,475 Cr.

Key Drivers of the Industry

  • Push for clean, affordable and scalable power source 

  • Market expanding from 8 wind states to pan India 

  • Tariff firming up; tariff cap on wind removed 

  • Demand-supply rationalised and WTG prices firming up 

  • Focus on Wind Solar Hybrid (Make In India Push)

In Conclusion, Post restructuring Suzlon Energy Ltd. has shifted its focus on managing the fixed cost of the company through selling assets and reducing unnecessary expenditure which will ultimately have a relaxing effect on cash flows. Moreover, Suzlon has a positive order book which will result in revenue generation.

It held leadership of the market in past, and has potential to bounce back.

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