Physical Address
Bengaluru, Karnataka
Table of Contents
Introduction
During our journey through Gujarat, we noticed vast wind power generators scattered across the landscape near Dwarka. Each tower bore a brand name, and one name stood out above all—Suzlon. This dominance persisted as we traveled from Dwarka to Porbandar, where Suzlon’s presence was equally unmistakable.
Once a market darling, Suzlon faded into obscurity, only to make a remarkable resurgence from near bankruptcy. This article delves into the inspiring turnaround story of Suzlon Energy.
History
In the 1990s, when India grappled with widespread electricity shortages and frequent load shedding, Mr. Tulsi Tanti recognized the immense potential of wind energy. In 1995, he founded Suzlon to primarily serve textile industry clients in and around Surat. At the time, India’s renewable energy sector was still in its infancy.
Suzlon experienced rapid growth and emerged as a prominent player by the mid-2000s, further extending its reach to international markets such as the United States, Germany, and Australia.
The company’s remarkable rise culminated in its listing on stock exchanges in 2005, cementing Suzlon’s reputation as a widely recognized and respected brand.
Suzlon’s Acquisition and Disposal of REpower
By 2006, Suzlon’s management recognized the need to expand into Europe and the US to realize its ambition of becoming the third-largest wind turbine manufacturer. As part of this strategy, the company acquired the Belgian firm Hansen Transmissions International NV in 2006, setting the stage for its eventual acquisition of REpower.
Acquisition of REpower
Suzlon’s management embarked on the acquisition of German wind turbine manufacturer REpower Systems AG, targeting its fragmented shareholding structure. Areva, a French company, held 30.15%, while Martifer, a subsidiary of the Portuguese firm Mota Engil, owned 23.08% of the outstanding shares, with the remainder held by the public. Suzlon valued REpower at €1.35 billion (₹7,425 crore).
In its initial move, Suzlon, then the fifth-largest turbine maker globally, acquired 627,000 shares (7.7%) through its subsidiary SE Drive Technik GmbH at €150 per share. However, the process became complicated as Areva also sought to acquire REpower, prolonging negotiations. By the end of 2007, Suzlon had increased its stake to 33.85%, but Areva and Martifer combined retained a majority stake.
The acquisition process, which lasted until 2013, saw YES Bank serving as Suzlon’s investment advisor, while $1 billion in loans from a German bank consortium funded the deal. Progress was hampered by Suzlon’s increasing debt burden, causing significant delays.
By 2009, the company faced a severe liquidity crunch and sought refinancing for both domestic and foreign currency loans as its consolidated borrowings climbed to nearly ₹15,000 crore. Suzlon repaid $750 million of its loans by selling a stake in Hansen Transmissions International NV, along with securing a $465 million offshore facility from the State Bank of India, reducing its gross debt by $350 million.
In 2012, Suzlon defaulted on $221 million worth of Foreign Currency Convertible Bonds (FCCBs), prompting a consortium of banks led by the State Bank of India to restructure ₹9,500 crore of loans.
Despite efforts to reduce debt in subsequent years, the company’s financial struggles persisted. Although the completion of the REpower acquisition caused revenue to soar, Suzlon fell into financial losses between 2009 and 2015, leading it to drop off the radar of value investors during this period.
Suzlon’s stock endured a severe market downturn as the company’s crippling debt burden weighed heavily on investor sentiment. With mounting liabilities and financial uncertainty, the market punished the stock, reflecting diminished confidence in its ability to recover.
Disposal of REpower and Suzlon’s Turnaround
The company faced a critical financial crisis, desperately seeking ways to restructure its mounting debts. A lifeline came from Dilip Sanghvi of Sun Pharmaceuticals, who infused ₹1,800 crore into the company, acquiring a 23% stake in return.
In its dire financial state, the company was compelled to divest REpower. In 2015, Suzlon sold REpower to Centerbridge Partners LP, USA, for €1 billion. The proceeds from this stake sale, combined with the capital infusion and debt restructuring by a consortium of Indian banks, were utilized to repay loans and stabilize the company’s financial position.
In July 2019, Suzlon Energy defaulted on the principal payment of $172 million for its outstanding bonds, further deepening its financial challenges. Since then, the company has undertaken loan restructuring measures, working with lenders to reorganize its debt and stabilize its financial position.
This restructuring played a crucial role in Suzlon’s recovery, allowing it to gradually reduce its debt burden, regain investor confidence, and reposition itself within the renewable energy sector.
Suzlon at a glance
By the end of FY24, Suzlon successfully returned to profitability. As of June 30, 2024, the company reported a net cash surplus of ₹1,197 crore, marking a strong financial recovery.
As of December 31, 2024, Suzlon’s wind order book stood at 5,521 MW, reflecting steady demand for its renewable energy solutions. The company has a manufacturing capacity of 4.5 GW, supporting future growth.
Suzlon boasts an extensive installed base of 20.9 GW, with 15 GW located across 94 sites in 9 Indian states. Additionally, through its subsidiary Renom, the company manages assets totaling 3,016 MW, further strengthening its presence in the renewable energy sector.
Some of the top clients of Suzlon are:
| NTPC Green Energy | Adani Renewables | ReNew Power | Jindal Renewables | Juniper Green Energy |
| Oyster Renewables | Leap Green Energy | Torrent Power | AMPIN Energy | Brookfield Renewable Energy |
| Apraava Energy | eDF Renewables | BlackRock | Reliance Industries | ITC |
| O2Power | ACC | Vedanta | Aditya Birla Group | ONGC |
Suzlon has significantly reduced its debt burden, marking a dramatic financial turnaround. Borrowings, which stood at ₹17,811 crore at the end of FY15, have plummeted to just ₹277 crore by the end of Q2FY25.
As of September 30, 2024, the company reported reserves of ₹1,764 crore, reinforcing its improved financial health. Additionally, Suzlon’s Return on Capital Employed (ROCE) has surged to 25%, reflecting a more efficient use of capital and strengthened profitability.
Suzlon’s promoters held 13.25% of the outstanding shares, reflecting their stake in the company’s resurgence. The Return on Equity (ROE) stood at 25%, indicating strong profitability relative to shareholder equity.
From a valuation perspective, the company’s trailing twelve-month Price-to-Earnings (P/E) ratio was 69.39, while the Price-to-Book Value (P/B) ratio was 17.94%, highlighting investor optimism.
Suzlon’s stock has delivered an impressive return of 2,020% over the past five years, showcasing its remarkable recovery. Notably, in the last two years alone, the stock has surged 612%, further reinforcing market confidence in its revival.
Conclusion
Suzlon has staged an impressive turnaround, transforming from a debt-laden, loss-making company into one that has successfully eliminated its financial burdens. Its journey underscores the importance of measured growth strategies and the risks associated with overleveraging and chasing easy capital.
When Suzlon initiated its bid for REpower, the 2008 global financial crisis was still months away. As the crisis unfolded, liquidity dried up, leaving the company struggling under mounting debt. Recovering from these missteps took over a decade, highlighting the long-lasting impact of financial decisions made in uncertain times.
Now, Suzlon is consolidating operations and positioning itself to leverage the growing push towards renewable energy, backed by initiatives from both the public and private sectors. As it charts a course for sustainable growth, its ability to navigate industry challenges will be critical. The market has already recognized its resurgence, rewarding Suzlon’s stock for its improved performance.
Suzlon’s two prior defaults on the principal repayment of its Foreign Currency Convertible Bonds warrant a cautious approach from investors towards all investment and capital raising decisions made by the company’s management.
Also Reads: Detailed analysis on Narayana Hrudayalaya, Apollo Hospitals, and Balkrishna Industries.
References
- Report on Suzlon’s acquisition of Hansen Transmission
- India’s Suzlon Energy completes REpower acquisition, a Reuters report
- Suzlon to acquire 100% stake in REpower, a Business Standard report
- Suzlon acquires 51% stake in Renom, India’s largest Multi-Brand Renewable Energy Operations and Maintenance Service company
- Suzlon scraps rights issue tied to takeover of REpower, a WSJ report
- Suzlon repays $780 million acquisition loan, an article by MoneyLife.Com
- Suzlon to sell turbine business to REpower, a report by Business Line
- Suzlon Energy page on screener.in
- Suzlon Energy page on moneycontrol.com
