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April 21, 2014Suzlon was long regarded as the poster boy of India’s renewable energy industry. The company in its heyday used to be amongst the world’s top 5 wind turbine equipment producers, with billions of dollars in revenue. However expensive acquisitions, poor execution and strong competition from Chinese WTG companies made Suzlon’s life hell over the last 5 years. Burdened with massive debt due to acquisitions and losses from its operations, Suzlon has been going from a new low to another new low. The stock price has plummeted by more than 95% from its peak value, as the company could not turnaround. We have been speculating on buying Suzlon stock for a long time, but we have always thought of it as a falling knife rather than a fallen angel.
Recent news flow has turned positive for the company. Suzlon has shed off a lot of assets such as its stake in Hansen, assets in China, wind farms in India etc. This has led to lowering of the overall interest burden for the company. The stock price at around Rs 10 is also not challenging anymore, with most investors already pricing in the worst. Suzlon’s German subsidiary REPower has been the star asset for Suzlon, repeatedly coming up with profits even as the home company kept on showing losses and decreased marketshare. Now Suzlon is banking on Senvion to finally change its fortune by hoping to list the subsidiary in the London stock markets with nearly $1 billion in IPO proceeds.
Senvion also managed to raise a largish 850 million Euro working capital facility from a consortium of German banks, which will help it to meet its business targets. Senvion is not only profitable but also a technology leader being one of the first companies to launch a credible large MW wind turbine for the offshore wind energy market. Tata Motors has been another Indian company that has rode the coattails of its foreign subsidiary to come out of its misery. Jaguar Land Rover have been on a roll in recent times thanks to spectacular product launches. Suzlon will be hoping that it can do a Tata Motors as well. Both companies have similar stories as they bought expensive foreign companies at the peak stock levels, during 2007-08 taking on a massive amount of debt.
Suzlon Group’s wholly-owned subsidiary Senvion SE has signed a new agreement with a consortium of banks to raise €850-million working capital. The agreement, signed in late March, is for a three-year period.
The consortium of banks was headed by BayernLB, Commerzbank Aktiengesellschaft and Deutsche Bank AG. This move enables Senvion SE to secure follow-on financing early for the credit facility of €750 million agreed in May 2012 for up to August 2014.