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Money May 5, 2013

Suzlon to raise $400 mn by selling non-core assets

Mumbai: World's fifth largest wind turbine- maker Suzlon Energy is planning to raise up to $400 million by selling 15 of its non-core assets in a bid to partly retire the huge debt pile of nearly Rs 14,600 crore, a top company official has said.

Earlier, the company was planning to raise $100 million.

"We have identified 15 non-core assets, mostly in overseas markets like China, US, etc, which we plan to sell in the next 12-18 months in a phased manner. We expect to realise nearly $300-400 million through the sale process," chief financial officer Kirti Vagadia told PTI here.

Reuters

Suzlon is also planning to sell stake in its forging business SE Forge. Reuters

The company has already initiated the process to sell stake in its wholly-owned Chinese subsidiary Suzlon Energy Tianjin, through which it will realise $60 million, or Rs 338 crore. He also said the entire proceeds from these planned sales will go into retire debt.

Suzlon is also planning to sell stake in its forging business SE Forge.

"We are also looking at selling some of our components manufacturing facilities in the country," he said, adding, "We will outsource such products to ensure cost reduction."

This is a part of Suzlon's cost cutting and debt reduction programme, Vagadia added.

The company, which got a lifeline from its lenders in January with Rs 9,500 crore debt restructuring, has embarked on a plan to reduce debt and interest by selling non-core assets and cut its fixed costs by nearly 20 per cent.

As part of this strategy, the Pune-based company has so far laid off 750 jobs in its German subsidiary REpower. The company has a total workforce of around 13,000 across 32 geographies it is operating in.

The company late March created history by becoming the first firm in entire Asia, ex-Japan to raise $647 million in overseas bond sale, which was guaranteed by its lead banker SBI as part of its plan to retire its $650 million forex loans.

However, the company is still talking to settle the USD 221 million with FCCB bondholders following the default last October.

"We have embarked on our cost cutting plan and we may lay off some more jobs in the future as well," Vagadia said, but ruled out job cuts in the domestic market. '

He further said the company plans to bring down the working capital, which currently stands at Rs 9,000 crore, to Rs 6,000 crore during this period.

The Suzlon Group, which has a total order backlog of $7 billion, most of which is with REPower, will concentrate on executing them in FY'14.

"FY13 has been a very bad year for Suzlon, mainly because of debt restructuring. But in FY14, we will concentrate on order execution," Vagadia said.

When asked about the company's plan to integrate REpower with the group, Vagadia said, "It is necessary for us to integrate REpower in the long-run as it will help us grow as a group. But it is not on our priority list for at least the next six months. We want to concentrate on execution and cost and debt reduction."

It can be noted that late January Suzlon managed a Rs 9,500-crore CDR out of its 14,568 crore rupee loans from 19 lenders led by State Bank of India. Following the CDR, 21 banks and other financial institutions would hold 32.1 per cent stakes in the once-highflying wind power maker.

The Tulsi Tanti-promoted company had further said the CDR proposal involves a 10-year door-to-door back-ended repayment plan with a reduced interest rate, which effectively means a 3 per cent savings on interest burden for the company, apart from a two-year moratorium on principal and term-debt interest payments, and from a fresh working capital loan of Rs 1,800 crore.

During the course of the two-year moratorium, interest worth Rs 1,500 crore will be converted into equity, the company said.

The other main lenders include IDBI Bank, Bank of Baroda, Axis Bank, Punjab National Bank, Indian Overseas Bank, Central Bank of India, Yes Bank, and State Bank of Bikaner & Jaipur among others.

Suzlon stocks are trading as much as 95 percent below its life-time high of Rs 459.85, peaked in early 2008, when the global wind energy sector was booming.

Last October the company had defaulted on a $221-million convertible-bond redemption (FCCBs).

The company is present across Asia, Australia, Europe, Africa and the Americas with over 20,000 mw of installed capacity across 32 countries. It employs around 13,000 across these geographies.

In the December quarter, Suzlon reported a fourfold spike in losses at Rs 1,154.5 crore, while revenue dipped 19.5 per cent to Rs 4,013.66 crore.

PTI

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