Suzlon to weigh selling off non-core assets after Rs 1,200-crore rights issue

The management said that the main objective of the rights issue was essentially to pare debt so that Suzlon Energy can get over its past of huge debt.

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Suzlon Energy Ltd will think of divesting its non-core assets after the scheduled rights issue, CFO Himanshu Mody told reporters on October 11.

The Rs 1,200-crore rights issue of the wind turbine maker, which suffered the sudden loss of its founder-chairman Tulsi Tanti on October 1, opened on October 11 and will close on October 20.

“There are a few non-core assets that have been identified by the management for divestment. Upon the completion of the rights issue, the board of the company will be meeting at the end of this month or early November to consider and approve second quarter results. The next steps to be initiated on those non-core assets and the timelines within which they should be divested, if at all they would be divested, could be considered by the board,” Mody said at the company’s first press conference after the demise of Tulsi Tanti.

Suzlon Energy, which has struggled with mounting debt for over a decade, has in the past tried to divest parts of the business to raise funds to pare debt. In 2019, the company attempted selling its operations and maintenance business and Canadian investor Brookfield and Denmark-based Vestas Wind Systems, separately, came close to acquiring the business but the deals fell through.

After three rounds of debt restructuring and the ongoing rights issue, the company aims to reduce its interest burden and revisit plans for divesting assets. The management did not disclose which assets would be considered for divestment.

The newly appointed Chairman Vinod Tanti said that Suzlon has executed 500 MW of solar power  capacity in the past, and while the company is focused on the wind power sector, it has the capability to do more in solar power if opportunity arises.

Also Read | Dilip Shanghvi says will fully participate in Suzlon Energy’s Rights issue

Rights Issue

The management said it is optimistic about the rights issue, given the initial response and has commitment from the Tanti family that it will subscribe fully to the shares it is entitled to.

Dilip Shanghvi, the founder of Sun Pharmaceuticals Industries Ltd, has conveyed to the promoters of the company his intentions to fully participate in the firm’s upcoming rights issue. He had given a lifeline to the company by buying a 23 percent stake in Suzlon for Rs 18 billion (Rs 1,800 crore) in 2015, to help the company to return to profitability after it became India’s largest convertible-bond defaulter in 2012.

The proceeds from the rights issue will be primarily used to repay debt, which stood at Rs 3,200 crore at the end of June. The company is offering shareholders 5 shares for every 21 held for Rs 5 a piece. Of this, Rs 2.50 a share would be paid on application while the rest Rs 2.50 would be payable on subsequent calls by the company.

Suzlon plans to use Rs 900 crore from the proceeds of the rights issue to repay debt, of which Rs 583.50 crore would be repaid at the time of application.

Mody said that the current debt has an average tenure of eight years with an interest rate of 9.5 percent. “There would be a 10 percent saving on approximately Rs 600 crore; that would be the annual saving for the company, on an immediate basis, assuming a full subscription to the rights issue,” Mody said.

In an exclusive interaction with Moneycontrol on October 3, Mody had said that the the main objective of the rights issue was essentially to pay down the debt so that Suzlon Energy can get over its past of huge debt.

Suzlon Energy has a total global installed capacity of 19.44 gigawatts (GW), which includes 5.96 GW outside India. It has 16 manufacturing facilities across India and it also provides operations and maintenance services.