Dilip Shanghvi to hold 23% stake in Suzlon, despite fall in value

Dilip Shanghvi to hold 23% stake in Suzlon, despite fall in value

The wind-turbine maker Suzlon Energy Ltd’s financial health has worsened over the last few years. Despite the company’s fall in value, Indian billionaire Dilip Shanghvi intends to stay invested in the unprofitable wind-turbine maker.

Dilip Shanghvi, founder and managing director of India’s largest drugmaker Sun Pharmaceutical Industries Ltd. said in an interview in Mumbai, “If I look at outcome then clearly that investment hasn’t had a great outcome.” Shanghvi added, Suzlon has to solve its own challenges.

Shanghvi believes that policy hurdles were responsible for lower demand for Suzlon’s wind turbines and the resultant cash squeeze.

In 2015, Shanghvi bought 23 percent stake in Suzlon for Rs 18 billion (Rs 1,800 crore), helping the company to return to profitability after it became India’s largest convertible-bond defaulter in 2012.  Suzlon still hasn’t exited India’s debt-restructuring program, missing deadlines since 2017.

The 63-year-old businessman proposed that his investment was based on the assessment that within the renewable-energy sector Suzlon had the product and the future pipeline, which will allow them to grow.

Over the past two years, India has shifted from an earlier fixed-tariff program to auctions for building wind projects which increased competition among suppliers, diluting Suzlon’s market share and putting pressure on its profit margin. The competitions from companies such as Vestas Wind Systems A/S and Senvion SA has added to the misery of the wind turbine makers, according to Bloomberg NEF.

After Suzlon was unable to meet a repayment obligation to its lenders, the long-term bank facilities of Suzlon had been slashed to default from BB by the ratings assessor Care Ratings Ltd. in April.

In July, the company has $172 million in foreign-currency, convertible bonds due.

A few weeks after Shanghvi announced the investment, the company’s market value plunged to ₹3,300 crore as on May 8, from a high of ₹10,900 crore.

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