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Tulsi Tanti has steered Suzlon away from a near-death experience. Can the company grow from here?

By Priyanka Sangani

HOW SUZLON GOT BACK

ON CK

Sale of German

Senvion

for ¤1 in 2015

(Addional ¤50mn subject

to cert conditions)

1800 cr

fund infusion

from DSA in

ebruary 2015

Stake sale in

Undertook cost cutting initiatives like reducing

Worked at reducing cycle times by relooking at processes in order

to bring down working capital requirements

n-eight foot tall windmill replica is the only thing that sticks out in Tulsi Tanti's otherwise spartan office at Suzlon's sprawling One Earth campus in Pune. The chairman and managing

director of Suzlon is in a relaxed mood, churning out anecdotes of the early days of Suzlon: the foray into the US, convincing customers to take a bet on an Indian manufacturer and how India's percep- tion has changed considerably in the Western world since then. Tanti's Zen state of mind can be attributed to the favourable winds blowing the way of Suzlon, the company he founded in 1995. Suzlon has just concluded the ¤1 billion sale of its German subsidiary Senvion. Also, the `1800 cr that Dilip Shanghvi Family and Associates (DSA) is investing in the company should be in officially in the next few days.
Things haven't always been this tranquil at Suzlon. Back in 2012, it was buffeted by a perfect storm of local and global headwinds. The Indian government withdrew policies which benefited the wind energy sector. Globally, the impact of the financial slowdown meant fresh orders dried up. Suzlon ended up defaulting on foreign cur- rency convertible bonds worth $ 209 million in October 2012.
A lot has changed in the past year with the Narendra Modi government setting ambitious targets for the renewable energy sector. "The government has announced a target of 60GW for wind power while the current installations in the country are at 23GW," says Amar Kedia, research
analyst, Nomura. "This is a strong opportunity for Suzlon given that they were market leaders in India and they have strong potential to come
back." Dalal Street analysts are a lot more positive about Suzlon's prospects and some are even using that magical word 'turnaround' in their reports. In other words, after a few pale years and losing some f lab, Suzlon is on the mend.

Foreign banks & Indian promoters "2012 was a crucial year for us," says Tanti. "In India, the market crashed 60% after the policies were withdrawn. Globally, we were still making money while most wind companies posted major losses but it became difficult for me to service my investments." Tanti found himself in an odd situa- tion where though the German subsidiary Senvion (formerly Repower) continued to

post profits, he couldn't transfer the funds back to India to service the debt he had taken on to acquire the company. "You could call it a non-tariff barrier," he says, referring to the German bankers' resist- ance in allowing Suzlon to repatriate funds or raise fresh debt. "Our bankers, SBI, tried talking to them as well, but maybe they had less comfort in the company and industry. Meanwhile, they've allowed Centerbridge
Partners - the PE fund who has bought Senvion - to go ahead with this, so really, it was an unfortunate situation for us."

Windmills of the Mind

Chinese subsidiary and US wind

farm in FY14 for

`700 cr

Sale of gearbox maker Hansen Transmissions for ` 890 cr in October 2011

fixed costs,lowering break

evens, reducing head count

and closing operations in

cert markets

WHAT'S NEXT

Policy changes have made the renewables sector in India an attractive proposition

Deal with DSA covers equity sale as well as wind farm JV and incremental working capital facilities

continued on pg2

Post Senvion

sale will focus on

high growth-high

volume markets

like India, China,

Latin America etc

TH2E 0YEAR

SBI worked wi h a consortium of

Mind

Back from... continued from pg1

JOURNEY

PHASE ONE: STARTED IN 1995, THE FOCUS WAS ON ACQUIRING THE LATEST TECHNOLOGY. COLLABORATED AND LATER ACQUIRED A FIRM IN GERMANY

PHASE TWO: GLOBAL FORAYS: SETS UP WIND FARMS IN US, CHINA AND AUSTRALIA AMONG OTHERS AND R&D LABS IN THE NETHERLANDS, GERMANY AND DENMARK

PHASE THREE: ACQUISITIONS: ACQUIRED BELGIAN GEARBOX MAKER HANSEN TRANSMISSIONS AND GERMAN WIND ENERGY COMPANY REPOWER (SENVION)

PHASE FOUR: CRISIS MANAGEMENT: BIGGEST FCCB DEFAULT IN INDIA, SALES IMPACTED BECAUSE OF GLOBAL SLOWDOWN AND CHANGE IN WIND POWER POLICY IN INDIA. WENT IN FOR CDR AND SOLD EUROPEAN ASSETS TO BRING IN LIQUIDITY. FINANCIAL INVESTMENT BY DSA

PHASE FIVE: GROWTH IN INDIA: WILL STRENGTHEN INDIA OPERATIONS AND FOCUS ON OFF- SHORE WIND FARMS AND WIND-SOLAR HYBRID MODEL

banks to put together a corporate
debt restructuring (CDR) package which gave Suzlon time to repay its debts as well as provide working capital in the interim. Supratim Sarkar, executive vice-president, SBI Capital Markets says, "We knew that the company had the potential to con- tinue to grow, but they needed time." What struck Sarkar was Tanti vol- unteering his equity in the company instead of a funded interest term loan (FITL) which would have resulted in the bank bearing losses for the first two years. "You almost never see an Indian promoter volunteering to part with equity so that the banks don't suffer," says Sarkar.
Selling the crown jewels? Senvion was the main contributor to company's revenues of `20, 212 cr (FY14) and post the sale, Suzlon is
no longer among the top five wind turbine companies in the world. This doesn't bother Tanti in the least. "My acquisition was on the technology front. I have the technology and am now equipped to overtake those vol- umes and break into the top three in
a few years," he says.
When Suzlon first started opera- tions two decades ago, there wasn't much interest in wind power in India with most people only looking at it
as a shortcut for tax benefits. This prompted Tanti to focus on expand- ing internationally, starting with the US in 2003. The company currently operates in 17 countries (down from
33 with Senvion) and has installa- tions of over 14.5 GW of which 8.6 GW are in India.
"Some people said that selling Senvion was akin to selling the crown jewels but given that the com- pany couldn't repatriate the profits to India it was a sensible decision," says Raahil Shah, research analyst at HDFC Securities. "The industry requires high working capital and the investment from DSA ensures that this won't be an issue for Suzlon."
Apart from selling overseas assets like Senvion and
gearbox maker Hansen

It takes five seconds

for one entrepreneur

to understand another

entrepreneur. Every-

body faces the same

problems and pains

Tulsi Tanti

CMD, Suzlon

and pains and if you have similar values it's easy," adds Tanti. DSA, which manages the Shanghvi family funds has invested in a purely finan- cial capacity and will not be seeking management control though at 23% its stake in the business is almost at par with the Tanti family's 24%.

A destination called India

In its post-Senvion avatar, India is ex- pected to form the bulk of Suzlon's op- erations for the next few years before global operations eventually start to form a sizeable presence once again. Today, India constitutes over 80%
of Suzlon's revenues and it is likely to remain this way for the next two- three years. "If your home market is strong you can be a strong global player because you have scale and
can bring down the cost of production and remain competitive globally. When we started, our home market wasn't strong so we had to do more business globally," says Tanti.
Though Tanti has sold off Senvion, he's acquired a license to use its
off-shore technology in the Indian market. Suzlon is setting up trial pro- jects off the coast of Tamil Nadu and Gujarat and Tanti believes that this will be the next major growth engine for Suzlon and the wind energy sec-
tor at large. "We may
have lost an asset but
was at 50% till a few years ago. We've done a focused market study and will be launching the next-generation of products. We will also work at reduc- ing the cost of energy by about 15% and continue to invest in technology and innovation" says Tanti.
One thing Suzlon has worked on over the years is to set itself up as an end to end service provider, and to- day, the maintenance contracts bring in a significant amount of service revenue. "We are maintaining all
the installations we've set up - about
14000 MW globally. It is annuity based revenue and as we put up new installations, this will continue to grow," says Kirti Vagadia, group head-corporate finance, Suzlon. The other area Tanti is looking at is wind and solar integrated hybrid plants. These integrated projects would enhance the company's topline, add better value to consumers and bring in stability in the grid, he says.

Leading from the front

The last few years did take their toll on the business and Tanti the leader. "The last 36 months were very diffi- cult for me," says Tanti. "I've always focused on technology and growth and don't have the core competency to do liability management - I'm a mechanical engineer. But I had to
go and meet bankers and give stake-
Transmissions, what also helped was the unexpected investment from Sun Pharma's Dilip Shanghvi. A common friend ap- proached Tanti to see if he would be open to getting
a financial investor on board. Tanti was "sur- prised" considering the financial state of the busi- ness but given that it need- ed an enormous amount
of liquidity to accelerate growth he was open to it. "It took about three

Whether it was putting his personal stake in the company on the line or making himself available to deal with bankers

and shareholders when things were tough, Mr Tanti

has always put the interests

of the business right on top

Kirti Vagadia

Group Head-Corporate

Finance, Suzlon

not our technological edge," he says.
Industry watch- ers see merit in the strategy. "Once the orders start to come in, the company is the best position to scale up-they have the highest capacity in India and are best placed to serve any additional demand. They will have the
upper hand over com- petition," says HDFC
holders the confidence that there is light at the end of the tunnel. The last few years were a completely different aspect to my management," he says.
Vagadia, who has been with Suzlon since its inception, says that Tanti
has never shied away from taking responsibility when it comes to deal- ing with the tough times. "Whether it was putting his personal stake in the company on the line or making him- self available to deal with bankers and shareholders when things were tough, he has always put the interests of the business right on top," says Vagadia. At the same time, he trusts

months - no lawyers, no bankers - and it was a very easy deal," recalls Tanti, about the deal which
was inked in February
2015. "It helped that we are both Gujaratis and already knew each other through the community, but also
it takes five seconds for one entrepreneur to un- derstand another entre- preneur. Everybody faces the same
problems
Securities' Shah.
While 2012-13 was a dark year for the global wind energy busi-
ness with the largest player posting a billion dollar loss in a single year, things are steadily improving. The international market is
growing at almost 20% while
India is likely to grow at over
30% in the next few years. "We will work aggressively
to regain our mar- ket share which
his team completely and delegates responsibility. "He is very growth oriented where as I'm there for risk management and control," he says. The tough times haven't had an
impact on Tanti's long term vision for the business. "I am not building the company for the next 10 years but for the next 100 years," he signs off. Bold words from a man whose company stood at the edge of the precipice less than 36 months ago. CD
priyanka.sangani@timesgroup.com

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