Suzlon charts a strong path post debt restructuring

Suzlon charts a strong path post debt restructuring

Last month, Crisil Ratings upgraded the Rs 4,054 crore worth of bank facilities of Suzlon Energy and removed ‘rating watch with developing implications.’

“The rating upgrade factors in sharp reduction in debt (paying off the entire term debt) done from the proceeds of a recent QIP, ” the agency had noted.

Analysts at ICICI Securities pointed out the company reported its first adjusted profit after tax (PAT) of Rs 170 crore in FY23 after FY10, excluding FY17. “We expect revenues to grow at a compounded 37% to around Rs 11,200 crore over FY23-25, analysts at the brokerage wrote. They estimate net profits at Rs 1,100 crore in FY25.

Post a restructuring of the debt, the company’s gross debt stood at Rs 1,806 crore in June. In August a Qualified institutional placement (QIP) of shares for Rs 2,000 crore helped the company repay Rs 1,500 crore of borrowings.

Debt levels have thus come down from Rs 11,552 crore in FY19 to Rs 1,937 crore in FY 23. The company’s net worth turned positive after nine years. Crisil had observed the fund-based borrowings are also expected to remain nominal because of healthy cash flow generation from the O&M (operation and maintenance) services business and no material debt funded capex plans.

Regulatory changes in the sector are expected to facilitate capacity addition.

“India has amended the wind energy policy, which adversely impacted capacity addition between FY17-FY23. It has discontinued with reverse e-auctions, introduced wind-specific RPOs (renewable purchase obligation), and its plans to auction 10GW per annum. Also, the repowering policy is under works,” analysts at ICICI Securities wrote.

The company’s consolidated order book stands at 1.6 gigawatts. Of this, the mix is 55% from the 3-MW turbine and 45% from the 2-MW turbine. From an installed base perspective, the company has a capacity of 3-4 GW from a mix of its 2-MW and 3-MW turbines.

The company has won major orders every month in the last couple of months, including a 31.5 MW wind power project for Integrum Energy Infrastructure and an order for 29.4 MW of wind capacity which is part of a 100 MW wind-solar project of BrightNight.

Analysts at JM Financial noted Suzlon has a leading market share 33% and higher depth of manufacturing (4.5GW). They feel the company is well-placed to grow its order book. Moreover, they point out the O&M services piece is profitable and that the company’s technology is superior, with 3MW sets under testing. They expect the order book to grow to 2GW by March 2026.

The company has cut back on costs in the last two to three years which helped the turbine business to achieve an Ebitda of Rs 48 crore in FY23. Additionally, the company has opted for orders with better margins and a receivable profile as also a pass- through for cost escalation, Crisil said. The agency estimates the company could achieve a consolidated Ebitda of above Rs 750 crore in FY24.

An email sent to company on the subject did not elicit any response.

Suzlon said in its Q1FY24 investor presentation a stronger balance sheet brings the ability to meaningfully participate in growth amid ongoing energy transition. “Our priority going forward is to pursue quality orders with a higher value and better margins. Our focus remains on executing and building our order book,” said JP Chalasani, group CEO at Suzlon Energy in on the analysts call.

The ministry of new and renewable energy has also announced a renewable energy project bidding trajectory of 50 gigawatt per annum, which includes 10 gigawatts of wind from FY24 to FY28. Suzlon is well positioned to capture the market opportunity from energy transition, the company said.

A senior executive at a consulting firm said that earlier lot of bids were happening separately for wind and solar energy. “But today utilities are asking for round the clock power, want lower costs but are technology agnostic. Solar and wind are complemented each other hence Suzlon has gained from this demand,” he said.

He said demand is also increasing from commercial and industrial (C&I) segment for captive power and legacy companies in the segment such as Suzlon, Siemens Gamesa and Vestas are gaining from the trend.

“Demand has increased but supply is limited. Companies are able to tap the demand. That’s why orders have improved.,” he said.

In 2019, Union Bank classified Suzlon Energy’s loan account as non performing asset or NPA. The company went in for debt restructuring in 2020, when its lenders took a haircut of 62% for the Rs 13,800 crore it owed to SBI-led consortium of 18 banks. In 2022, the SBI-led consortium sold loans worth Rs 8,000 core to Rural Electrification Corp (REC) and Indian Renewable Energy Development Agency (IREDA).