India: Suzlon Energy Limited, one of India’s top manufacturers in the wind component manufacturing segment as per capacity, and one of the top renewable O&M service providers in India, has opened its rights issue to raise up to Rs. 1,200 crore, on October 11, 2022. The entitlement ratio for the rights issue is 5:21 (five shares for every twenty one equity shares held by eligible shareholders of the Company, as on the record date of October 4, 2022).
With a footprint across 17 countries spread over six continents, Suzlon Energy has the largest wind installed base as a wind energy OEM, with approximately 13.45 GW of installed capacity in India as at June 30, 2022. It contributes towards nearly 33% of India’s wind installed base. It is also the largest wind O&M service provider in India, in terms of capacity. The Company also has an installed capacity of approximately 5.96 GW outside India, aggregating to a global installed capacity of 19.44 GW.
Suzlon has 16 manufacturing facilities across India in strategic locations, to manufacture forging and foundry components that are required for the manufacture of Wind Turbine Generators and their components. The Company already has an order book of 700MW in place for execution. Due to its established track record over 27 years and vertically integrated low-cost supply chain, Suzlon has relationships with several customers, including large independent power producers, public sector undertakings and marquee institutions.
The Company expects growth to be driven by the Commercial & Industrial (C&I) segment, which is gaining strong momentum due to wind energy being critical for high PLF projects. In addition, the emergence of hybrid (solar + wind) power also is a key driver, as most of the customers and utilities prefer higher PLF and scheduled power availability. Finally, wind repowering is also expected to drive nearly 20GW of capacity till 2030, since existing wind capacities would need rebuilding. Government policies also bode well for the wind energy sector, amongst which is the in-principle decision to stop electronic reverse auction for wind power projects in India.
The Promoters and Promoter Group have re-confirmed their participation in the upcoming rights issue, and also declared that they will be fully subscribing to the extent of their rights entitlement. One of the significant investors in the Company, Mr Dilip Shanghvi has also confirmed his intention to fully participate in the rights issue with subscribing for additional shares, as per a disclosure filed with the stock exchanges. The rights issue does not have a minimal threshold of subscription; the Company will be able to use the proceeds raised through the rights issue irrespective of subscription level.
The proceeds of the rights issue will be used to reduce the outstanding debt of the Company, which in turn will strengthen the balance sheet, reduce interest cost outgo, and improve profitability. This in turn will also unlock working capital for the Company to further increase its project execution. As per the Letter of Offer, the Company currently has Rs. 3,272 crores of debt, part of which will be paid off using the proceeds of the rights issue.
Speaking on the development, Chairman and Managing Director Vinod R Tanti said, “Suzlon Energy has an established track record in the wind energy sector with more than 27 years of experience. We are one of India’s top manufacturers in the wind component manufacturing segment as per capacity and are one of the top renewable O&M service providers in India, as per capacity serviced. Our long history provides us with the network and strategic alliances that in-turn provide us access to diversified development projects across all of India’s wind resource rich states.”
Speaking on the development, Executive Vice Chairman Girish Tanti said, “Renewable capacity additions are likely to increase further to 95-100 GW over Fiscals 2023 to 2027, primarily due to environment-driven shift towards renewable generation, government support through favourable policies for domestic equipment manufacturing and renewable power offtake, growing participation from central generation companies in addition to existing private entities, and strong funding support. The overall installed capacity is expected to reach 520-525 GW by Fiscal 2027, supported by wind capacity growth at a CAGR of 9-10%. Suzlon Energy’s leading market share makes it well-positioned to leverage its reputation and existing customer relationships to take advantage of anticipated future growth in demand for renewable energy sources.”
Suzlon also aims to continue to improve its financial position through its liability management program, and through the sale of non-core assets. The Company is also seeking to achieve greater operational efficiencies and reduce fixed cost by: (i) focusing on sale of WTG in the Indian market; (ii) reorganising its various business divisions; (iii) developing new WTG models that are customised for the India market; (iv) expanding the O&M service business in India; and (v) optimized funding of working capital requirements.