Shareholders of Suzlon Energy on Wednesday approved raising Rs 2,000 crore via the qualified institutional placement (QIP) route. Funds will be used to reduce debt and for working capital and capex needs. Reacting to the development, shares jumped 4.99% to close at Rs 19.56 on the BSE.
The QIP of equity shares of face value Rs 2 each would be of up to Rs 1,500 crore with an option to retain an oversubscription of up to Rs 500 crore. The floor price has been set at Rs 18.44 per equity share. The company may offer a discount of not more than 5% on the floor price.
The wind turbine and energy solutions company had gone through multiple rounds of debt restructuring and capital infusion since 2020. Speaking at a recent investor call, group CFO Himanshu Mody said after a 44% reduction in debt during FY23, the company would further reduce debt in the current fiscal.
Mody said Suzlon’s gross debt at the end of the June quarter stood at Rs 1,806 crore, a substantial reduction from a little over Rs 13,000 crore in March 2020. The company’s net debt as of June 30, 2023 was Rs 1,223 crore, resulting in a net debt-to-net worth ratio of 0.9. Being less than 1, the ratio is quite healthy, Mody said.
Promoters had pumped in Rs 250 crore through rights issues and preferential allotment.
“With a continuous focus on deleveraging of the balance sheet in the last financial year, we have achieved a substantial reduction in net finance costs, which for Q1FY24 stood at Rs 51 crore versus Rs 148 crore in the year-ago period, a substantial reduction of 66%,” Mody said.
Apart from becoming debt-light, the company is planning to release some cash for working capital and capex needs over the next few quarters.
The company had tied up around Rs 1,000 crore in working capital funding from institutions to ramp up deliveries. The board has also approved conversion of a working capital loan into equity in case of any defaults. It has been done to increase the comfort of lenders, but given the current situation, chances of loan default are low, Mody said.
On the back of a flurry of new orders, Suzlon Energy is targeting a 25-30% market share of the country’s wind energy projects commissioned this year. The company has secured orders of around 1,582 MW as on June 30, and around 55% of these orders are to be executed in FY24. Suzlon has seen a 30% rise in order intake with 890 MW already being booked in the current fiscal.