Suzlon Energy shares hit new low, tank 24% on default rumours

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Mumbai | Updated: February 6, 2019 5:34:37 AM

Suzlon, as part of the wind power industry, has been facing the consequences of the slump caused by the implementation of reverse bidding in place of feed-in tariff regime, which led to drop in tariffs for wind projects, cancellation of auctions, and drop in margins for the company.

Suzlon Energy, Suzlon Energy shares, FCCB payments, BSE, Suzlon Energy Q3FY19 earnings Shares closed the day 24% down from the previous close at Rs 3.63.

Wind turbine manufacturer Suzlon Energy’s shares touched a record low of Rs 2.70 a piece on Tuesday on the BSE on rumors that the company may default on its FCCB payments due in July. Shares closed the day 24% down from the previous close at Rs 3.63. The rumours were denied by the company as baseless.

In one year since February 4, 2018, the stock has fallen close to 73%, while it has dropped close to 67% since the beginning of FY19. The company has been struggling to improve its finances since the default on its FCCB payments in 2012, which also led to pledging of 77% shares of the promoters as collateral. Reacting to the development the company clarified that they have been regular in servicing the debt obligations towards banks and others including for the month of January 2019.

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“The rumours about the company are baseless… we wish to submit that the company is committed towards compliance of the Listing Regulations and would ensure necessary disclosures as and when applicable,” Suzlon said in a BSE filing. The company further said that none of the shares of the promoters held in the company were invoked. “The promoters’ shareholding in the company has been pledged for collaterally securing the obligations of the lenders of the company and not towards securing promoters’ personal borrowings. And the said pledge too is not mark-tomarket. This is being clarified with a view to safeguard the interest of the investors and all the stakeholders,” a separate clarification to BSE said.

Suzlon, as part of the wind power industry, has been facing the consequences of the slump caused by the implementation of reverse bidding in place of feed-in tariff regime, which led to drop in tariffs for wind projects, cancellation of auctions, and drop in margins for the company. In Q2FY19, the company reported a loss of Rs 696 crore against a profit of Rs 68 crore in the corresponding quarter of previous year on account of three-fold jump in foreign exchange loss, and lower execution of orders. In FY18, Suzlon reported a net loss of Rs 389 crore compared with a net profit of Rs 899 crore in FY17, when India saw record wind power capacity installation of 5,500 MW.

The company is, however, hopeful of a good FY20 as it expects execution of majority of its 1,800 MW order backlog to take place. The wind turbine manufacturer also plans to reduce its debt by 30-40% by FY19 by selling off its non core assets, JP Chalasani, CEO, told analysts in the Q2FY19 earnings call.

As of September end, net debt of the company was at Rs 10,312 crore, while the cash and cash equivalent was Rs 120 crore for the period. The company will report its Q3FY19 earnings on February 7.  “We expect Suzlon to garner reasonable market share in upcoming auctions leading to a sharp rise in execution in FY20 and FY21. Moreover, we expect the asset monetisation will help Suzlon to reduce its long-term debt by 30%-40% before end of FY19,” IDFC Securities had said in the Q2FY19 earnings report.

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