Suzlon Energy seeks Rs 4,200-crore bailout from govt-owned PFC, REC

Suzlon Energy, a loss-making renewable power firm, has sought a Rs 4,200-crore bailout from the government-owned Power Finance Corporation (PFC) and REC.

According to banking sources, Suzlon Energy has proposed that because REC and PFC have specialised knowledge about the power sector, the two institutions are in a better position to address the specific needs of the company. Besides the ongoing Covid pandemic, which impacted its supply chain, the company has blamed higher goods and service tax for its losses and sought a one-time settlement from its lenders.

According to the proposal made by Suzlon to its lenders, REC will hold up to 50 per cent of the sanctioned OTS (one-time settlement) amount, while the balance will be tied up with PFC. The plan says all the securities held by the consortium lenders, including promoter pledged shares and promoter Tulsi Tanti’s guarantee, will be transferred to the new lenders. The promoters currently hold a 16 per cent stake in the company, which has a market valuation of Rs 10,562 crore (as on Friday).

When contacted, a company spokesperson said the firm is exploring operational and strategic growth plans, and as a policy does not comment on speculative news.

“The company is on schedule towards meeting all its commitments to its lenders,” the spokesperson said.

In its presentation to the lenders, the company said two bidders — Vestas Wind Systems, a Danish wind turbine manufacturer, and Canadian financial powerhouse Brookfield — backed out after significant progress.

The company said its debt restructuring by the lenders was done to protect the value, which would have been “destroyed” under the Insolvency and Bankruptcy Code process.

Under the existing structure, the company cannot sustain any potential bad cycle in the future and it will be “very challenging” to meet total debt obligations without growth, it said, asking the banks to clear a one-time settlement.

The company had net debt of nearly Rs 6,405 crore as of September last year.

In its December quarter results, Suzlon Energy said it continued to incur losses (before exceptional items and tax), and the net worth of the group was at negative Rs 3,356.40 crore (December 31, 2021). It also said the group has an obligation to repay the principal amount to its lenders, including Rs 450 crore, falling due on June 30, 2022.

“These events and conditions indicated a significant doubt in the group’s ability to continue as a going concern on the balance sheet. The management has plans to meet the financial obligations in the foreseeable future through various options, such as cash flows from operations by way of execution of the pipeline of orders in hand, future business plans, the realisation of trade receivables and financial assets, sale of non-core assets, and conversion of share warrants," the company said.