In this edition, we examine Suzlon’s debt relief measures. The trail throws up important questions which call for a thorough probe.The debt restructuring to the tune of Rs 11,367 crore was approved in June 2020 and entailed a slew of measures through conversion of debt into equity and bailout loans. The lender consortium was led by SBI.

In February-March this year, the lenders approved a plan whereby their OCDs of Rs 4,099 crore was converted into about 57.14 crore equity shares with a face value of Rs 2 each.This means a conversion of Rs 71.74 per equity share at a time when it was being traded in the stock exchanges under Rs 9 each. The conversion raised the lenders’ stake in Suzlon by a mere 2.42 per cent to 15.14 per cent from 12.72 per cent.The market cap of Suzlon Energy Ltd (SEL) is in the range of Rs 8,000-8,500 crore and the lenders have got 2.42 percent for Rs 4,099 crore! The detailed calculations are presented in the story.

Even more startling are the developments surrounding equity conversions related to 15 private entities. Three months before the conversion of OCDs, Suzlon converted 4,998 CCDs of Rs 1 lakh each of 15 private entities shareholders into equity at Rs 2.45 per equity share. This included a premium of Rs 0.45 per share. At that time the shares were being sold at Rs 8.50 each on stock exchanges. When the CCDs were allotted in mid 2020, the share price on the stock exchange was Rs 4.65. The15 private lenders were issued equity shares for Rs 499.80 crore. So, within a few months, these private companies could make whopping profits, several times of their initial investments.

While the private parties benefitted, the SBI led consortium took enormous hits. So, we see two conversion of debt instruments into equity – one favourable and another stacked against the recipient. Did someone or some entities orchestrate a favourable deal for the private entities leaving the lenders to hold the can? This is a germane question on several counts. First, two government institutions, REC and IREDA are also bearing the debt load of Suzlon through bailout loans. Second, the company has been incurring losses. Third, its debt servicing capacities are in doldrums.