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Suzlon approaches complete collapse

Buyers are gone, the deficit deepens and Suzlon's debt has exploded. The Indian OEM has halted payments to most of its investors, several of which are threatening the manufacturer with insolvency liquidation.

This photo does not depict a Suzlon turbine. Photo: Marcelo Pinto/ APlateia

One positive thing about having a share price that has fallen close to zero is that is can't really continue its dramatic demise.

Suzlon stock is down to as far as INR 0.05 (EUR 0.00063) after the firm's Q3 interim report, which was once again a rather demoralizing read.

Revenue from wind turbine sales totaling INR 1.96 billion (EUR 24.8 million) was down by almost three quarters compared to the same period last year. Another matter is the growing deficit, which in the last quarter came to INR 7.78 billion. The worst post, however, is the short-term net debt, which the firm's account writes has deepened from INR 62.4 billion from Q2 to INR 108.6 billion at the end of September.

All in all, the turbine maker's congested financials typed on A4 pages tell a relatively horrific tale.

"The Company has defaulted in repayment of loans (including Foreign Currency Convertible Bonds (FCCB) of ~ 1,254 crores [INR 12.54 billion -ed.]) and interest aggregating to ~ 2,979 crores, as at 30 September 2019. Further, the lenders of a subsidiary have recalled loans of ~ 4,088 crores which were backed by Standby Letters of Credit from certain lenders of the Company subsequent to 30 September 2019," Suzlon's account, Deloitte Haskins & Sells LLP, informs, adding:

"The Company has also defaulted in making payments to most of the trade creditors out of total outstanding of ~ 1,261 crores as at 30 September 2019. Certain overdue creditors have issued notices to the Company under the Indian Bankruptcy Code and few have filed insolvency proceedings against the Company with the National Company Law Tribunal (NCLT)."

Bids withdrawn

This is not the first time creditors threaten Suzlon with forced liquidation. This same thing occurred this summer, when the Indian OEM failed to buy extra time in delaying debt amortization with its financiers, as the company defaulted on making bond payments in foreign currencies. However, the one-time settlement (OTC) entered in June and August is now retracted, "as the potential investors supporting the OTS plan have withdrawn their non-binding offers," the accountant writes.

The last few months have seen frequent reports of potential investors. None have formally confirmed such interest, but the rumor mill mentioned Vestas and then Canadian investment fund Brookfield and then once again Vestas. However, no deal emerged from any of these alleged encounters.

Most recently, around one month back, Suzlon Founder and Chair Tulsi Tanti told the press that a new investor had appeared.

"We cannot disclose the name, as we have singed a non-disclosure agreement," he told Livemint.

Nothing has come up since about this mystical suitor.

Negative net valuation

Nor did Suzlon's press statement on the Q3 report make any mention of the investor. The period's one highlight was that Suzlon Global Services won a prize in the service category in the Asia-Pacific Quality Organization's award event in September.

Prior to this spring's insolvency petition from Suzlon's former subsidiary, Senvion, the German turbine maker also emphasized the relative merits of its service division. The former's OMS unit is actually faring quite admirably, going forward on both the top and bottom lines.

"Our Operation and Maintenance Services (OMS) business continues to deliver strong profitability & high machine performance for the customers, surpassing industry benchmarks," writes CEO J.P. Chalasani, who asserts that the firm continues efforts to solve its problems.

"India is expected to be a relatively high volume market once the transitional problems and policy uncertainty are addressed. We continue to work determinedly for a sustainable long term debt resolution plan with our consortium of lenders, to preserve the value of the company," Chalasani adds.

That value is not so great at the moment. In its review of the quarterly financials, Deloitte Haskins & Sells LLP estimates Suzlon's net value at the end of Q3 to be INR -83.5 billion.

"The aforesaid conditions indicate severe liquidity stress, and consequentially, existence of a material uncertainty that may cast a significant doubt about the Group's ability to continue as a going concern," the accountants write in the report.

English Edit: Daniel Frank Christensen

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