What went wrong with Suzlon Energy?

Some excerpts:

Suzlon Energy’s promoter and Chairman Tulsi Tanti took pay cut of Rs 1.46 crore last year as the company grappled with losses, according to the wind turbine maker’s annual report. For the year ended March 31, Suzlon incurred a net loss of Rs 479 crore. It was once the darling among new renewable energy companies. But despite being among the world’s top wind turbine makers, today it is bogged down under mountains of debt and uncertainties if it will be able to honor its FCCB (foreign currency convertible bonds) holders. Add to that slowdown in demand amid the overall global economic crisis has made matters worse. Suzlon was built from scratch by Tanti and by 2008, the company was the world’s fifth wind turbine maker. In its efforts to scale up, it acquired Belgium-based Hansen Transmissions International in 2006 and Germany’s REpower Systems in 2007 among other companies.

But cracks began to appear in 2008. A customer Edison International complained that windmill blades it had bought from Suzlon had begun to split at some sites. This became a major embarrassment for Suzlon, which had to rectify the manufacturing defect and compensate customers for cracked blades. The comprehensive retrofit programme cost Suzlon over USD 100 million. The company has managed to put that issue behind its back. However, it is now facing a bigger issue of huge debt of over Rs 11,000 crore and repayment of FCCBs even as there has been a slowdown in demand, especially in US and Europe and delay in payments by some customers amid the global economic downturn.

Suzlon had raised funds via FCCBs to acquire REpower. But now its shares are at over 70% discount to the conversion price of FCCBs, so it has no choice but to repay the bond holders. But for that it will need to raise more funds. However, it has loan repayments of around Rs 3,700 crore due in the current financial year, including FCCB payments.

Debt-laden Suzlon sold its 26% stake in Hansen in 2011. Last month it agreed to sell a stake in its China manufacturing unit to China Power New Energy Development Co for around Rs 340 crore. Suzlon also said towards June-end that it is in advanced stage to raise USD 300 million from its senior secured lenders and its bond holders approved extension of repayment date of USD 360 million to July 27.