If anyone can even attempt to portray a setback as a benefit, it’s Tulsi Tanti. The 51-year-old chairman and managing director of Suzlon Energy, says the cancellation of an order for turbines by Edison International, California’s largest utility owner, turned out to a win-win situation for both parties. Tanti remains unfazed by the wave of negative publicity that has hit the Rs 13,531-crore Suzlon over the last six months after rotor blades supplied by the company developed cracks. His survival instincts are probably what has brought him this far. For sure, he has tremendous deal-making abilities —Tanti pulled off a financial coup when he acquired 89 per cent of the voting rights for RePower by putting up a very small sum of money upfront. In a conversation with Shobhana Subramanian and PB Jayakumar, Tanti says Suzlon, now the world’s fifth largest wind turbine manufacturer, intends to grow at twice the industry rate.
Has the cancellation of the order by Edison hurt Suzlon’s reputation?
Actually, the cancellation has turned out to be good for both of us. With the first phase delayed because of cracked blades, we would not have not been able to execute the second phase (of installing an additional 150 mw capacity for Edison)in the prescribed time. Edison would have suffered because of that. Since neither of us was comfortable with the situation, it was best they called it off.
We were able to sell the 150 mw (that we didn’t supply to Edison) at a higher price to another customer. So there have been no financial damages. Our relationship with Edison remains a good one.
Why did Edison cancel the order?
There was no design defect but a part of the blade didn’t have the requisite tensile strength. We entered the market in 2003 with a small order and spent the whole of 2004 and 2005 studying conditions, grid structure overseas, environment, temperatures and have done a lot of research. We have been able to fix that. There can be teething troubles, which people don’t seem to understand.
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For how many clients are you retrofitting blades?
We are retrofitting blades for around five clients in the USA, Portugal and Brazil. Till date, we have provided a sum of around Rs 120 crore in the last quarter of FY08 to retrofit 1,251 blades. There is also a general balance sheet provision of Rs 595 crore. Apart from this, we have not received any additional complaints from customers. We do not see any increase in the debtors position because of the cracked blades. Also, a few customers cancelling orders cannot impact us. We can go to different geographies.
There are reports that Suzlon does not have access to RePower’s technology because of certain laws in Germany.
As far as I am concerned, I have bought the company and the technology comes along with it. People don’t seem to understand this.
Do you believe a section of the media is targeting you because an Indian company has been successful?
Well, there has been speculation in the media by one newspaper, but I wouldn’t say we’re being targeted by anyone.
Are you growing too fast for your own good?
The demand is huge because oil prices are soaring. China alone plans to have an installed capacity of 1,00,000 mw — the entire world today has a capacity of 95,000 mw. We have to grow fast to cater to this demand. Last year we captured a 3 per cent market share and we intend to add another 3 per cent this year. Today we are in 20 countries, we plan to be in another 20 countries in the next five years. We hope to grow at twice the industry rate of 20-25 per cent.
How much have you paid for the 30 per cent stake that you recently picked up in RePower?
I can’t share the details of the acquisition price, but it is somewhere close to the ¤150 per share that we paid for the earlier stake of close to 34 per cent. We have funded this transaction through a $500-million FCCB. Our total stake in RePower is now 63.5 per cent and we have voting rights for 89 per cent of the equity of the company. We will be buying out Martifer’s 23 per cent stake by May 2009 at a pre-determined price.
Are you planning to sell any part of the stake in RePower as you had indicated some time back?
The price of RePower has appreciated since we bought the stake at ¤150 per share. We had said we might consider selling a part of it because of the appreciation in the share price but we haven’t decided on it yet.
Your investment in China has been done through a private route rather than through Suzlon?
Well, we have picked up a minority stake of 26 per cent in Honiton Energy. That is a family initiative and it’s an investment. Suzlon’s business model is different — it builds and transfers, it doesn’t invest. RePower already has orders for 150 mw in China and Suzlon has 600 mw. So, it’s not as though we’re ignoring the Chinese market. Incidentally, Honiton is already a customer of RePower.
What is your order book like?
We have orders worth around Rs 16,000 crore excluding Hansen and RePower. RePower has orders for about ¤1.5 billion.
Are your children planning to join you?
My son, Pranav, and my daughter, Nidhi, are graduates and are working in the financial services industry. They may want to pursue higher studies. Since I never joined my father’s business, I have left it to them to decide what they want to do. Perhaps, they can help me with my acquisitions at some point.
You spend six months of the year overseas. Are you planning to become an NRI?
Not really. I travel a lot but there’s no need to become an NRI just yet.