Suzlon eyes long-term loans, QIP to trim debt

The company on Friday said its board has approved raising up to ₹2,000 crore through a qualified institutional placement to repay debt and for growth capital. It has also been in talks with foreign banks and non-banking financial companies to raise long-term debt.

“Between debt and equity, the company has to raise ₹2,000 crore. By the first week of August, clarity will emerge on the nature of fundraising. Management is clear the company has to reduce debt on the balance sheet. The company will look at partly repaying debt due to Rural Electrification Corp. (REC),” one of the two people cited above said, adding the company has strong interest from equity investors for the QIP.

Last year, State ​Bank of India, along with 15 other banks, sold over ₹8,000 crore of Suzlon Energy loans to REC and the state-owned Indian Renewable Energy Development Agency (Ireda) as part of a balance-sheet clean-up. After this, the company was declassified as a defaulter on the books of banks.

Suzlon plans to raise equity at the listed parent company level; and is talking to banks to raise debt on the books of subsidiary Suzlon Global Operations and Maintenance Services (GOMS), which manages assets worth $12 billion.

“Suzlon will borrow in their subsidiary, which is the operations and maintenance (O&M) company and upstream the cash to the parent to ensure repayment of the parent facilities by the two lenders. Then, the parent will become debt-free, and then they will be able to raise non-funded limits, bank guarantees and LC limits and start the growth cycle again. The whole idea is to kick off the growth cycle,” the second person added.

Raising debt through its O&M subsidiary, which earns steady annuity income through contracts, will give comfort to investors. The funds are likely to be used to repay the parent’s debt, enabling Suzlon to improve financials and participate in major renewable energy tenders likely this year.

According to a report by ICICI Securities, Suzlon is set to gain from the recent amendment of the wind energy policy and also a series of initiatives, including discontinuation of reverse auctions, implementation of wind-specific renewables purchase obligations (RPOs), and the plan to auction 10GW per annum.

The company enjoys a market share of 33% in India’s domestic market, based on total installations. It has 20GW of operational wind power capacity globally and has an existing order book of 1.5GW, which bodes well for execution through the next two years.

In the March quarter, Suzlon Energy posted a consolidated net profit of ₹320 crore, on lower expenses. The company reported a consolidated loss of ₹205.52 crore in the year-ago period. The total income from operations dipped to ₹1,699.96 crore in the quarter ended 31 March 2023 from ₹2,478.73 crore a year ago.

Updated: 09 Jul 2023, 11:54 PM IST