InvestorQ : How do you see Suzlon as an investment after the recent restructuring proposal given to the banks?
Mary Joseph made post

How do you see Suzlon as an investment after the recent restructuring proposal given to the banks?

sara Kunju answered.
1 year ago

Suzlon had been deep in debt and is been pushed close to NCLT resolution. However, there is now an offer from the company to the banks for a one-time settlement. Suzlon Energy will offer to restructure debt at a much steeper discount than Indian banks have been willing to consider so far. Banks may have to now either plump for this haircut or push the wind turbine maker closer toward bankruptcy. Suzlon has made an offer to banks to swap its Rs.11,300 crore ($1.6 billion) of outstanding debt into Rs.3,600 crore of new debt. This virtually translates into a 68% discount (haircut) for the bankers that have given loans to the company. Banks had been willing to take up to 50% haircut but 68% is something they had ruled out in the past also.

However, Suzlon has also made an offer to retain Rs.1,350 crore of contingent debt, including bank guarantees, that will raise overall recovery for banks to 39.1% from 31.8%. Suzlon will has agreed to repay Rs.1,000 crore of debt within one year through asset sales along with a dose of cash infusion from the promoters. Currently, the Tanti family and Dilip Shanghavi of the Sun Pharma group are among the largest shareholders of Suzlon. The company’s shares have fallen more than 50% over the last one year amid India’s focus to compress clean energy costs. This has forced companies like Suzlon to pass lower margins to turbine manufacturers compressing their profits further.

The Suzlon stock was locked in upper circuit on the last day of the week but a lot will now depend on the action of the banks. If they accept the proposal, then it will be a positive for the company and could see price appreciation. If it goes into bankruptcy, anyways the shareholders are unlikely to get anything.