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Interest cost to halve; to turn profitable in FY16: Suzlon

Suzlon Energy chairman Tulsi Tanti said the sale of its German subsidiary Senvion, which accounted for half of the group’s revenues, would help the residual business grow at a faster pace.

Interest cost to halve; to turn profitable in FY16: Suzlon

Hours after debt-laden wind turbine maker Suzlon Energy  announced a mega 1 billion euro sale of Senvion, its largest subsidiary, its chairman Tulsi Tanti defended the move, claiming the move would cut the company’s debt, interest cost and boost operations going forward.

In an exclusive interview with CNBC-TV18, Tanti said the company would use Rs 6,000 crore of the Rs 7,200 crore proceeds to repay debt towards Indian banks and said the remaining Rs 1,200 crore would be plowed into the company as equity.

Tanti further said that the company had offered holders of its foreign currency convertible bonds an option to convert about Rs 3,000 crore of debt into equity at a price of about Rs 16 per share.

“In all, this would bring down our debt from Rs 16,500 crore to Rs 7,500 crore,” he said, adding that another Rs 4,000 crore worth of its debt was in the form of bullet bonds to be repaid in 2019 (non-redeemable with face value payable at maturity). “As a result, we now have only Rs 3,500 crore of working capital debt.”

As a result of the Senvion transaction, Suzlon’s overall interest cost would be cut in half, from Rs 1,600 crore to Rs 800 crore.

Tanti also looked to assuage the market’s concerns that hiving off Suzlon would leave the residual company without any major operations and said infusion of additional equity, along with exposure to its “high growth” home and emerging markets would help the company turn profitable in the next financial year.

Senvion accounted for about half of Suzlon’s roughly Rs 20,000 crore revenue last year but Tanti said that following the sale, the residual business would clock faster volumes.

Suzlon shares were down over 4 percent in afternoon Mumbai trading following the deal’s announcement.

Suzlon Energy stock price

On January 22, 2015, at 14:50 hrs Suzlon Energy was quoting at Rs 16.02, down Rs 1.17, or 6.81 percent. The 52-week high of the share was Rs 36.80 and the 52-week low was Rs 9.36.

The latest book value of the company is Rs 8.63 per share. At current value, the price-to-book value of the company was 1.86.


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