Suzlon Energy slumps 7% in 2 days amid buzz over fund raising

Analysts have pointed that equity dilution is a concern amid these fund raising plans. In addition to this, declining cashflow seems to have sparked concerns over the company servicing its debt obligations.

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Shares of Suzlon Energy tumbled 7 percent since Wednesday following reports that the company plans to go public later this month to raise Rs 1,500-1,800 crore by selling shares to institutional investors.

The share sale to institutional investors is supposed to help the wind turbine maker to substantially cut debt amid its ongoing efforts to turn around the business.

Analysts have pointed out that equity dilution is a concern amid these fund raising plans. In addition to this, the company’s cash flow has also dipped sharply after improving in March FY21 and FY22.

Declining cashflow seems to have sparked concerns over the company servicing its debt obligations.

The company’s June-quarter performance had also dampened the investor sentiment. Consolidated net profit in the June quarter came in at Rs 100.90 crore, down 96 percent on-year, whereas sales were down 2 percent at Rs 1,350.98 crore and EBITDA fell nearly 4 percent to Rs 209.50 crore.

At 11am, shares of the wind turbine maker were trading 1.5 percent lower at Rs 18.22 on the BSE.

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The company’s gross debt for the June quarter stood at Rs 1,806 crore, which is a significant reduction from a little over Rs 13,000 crore in March 2020, Suzlon Energy’s management had highlighted in its recent conference call with analysts.

“Our net debt as of June 30 stood at Rs 1,223 crore, leading to a net debt-to-net worth ratio of 0.9, which is less than 1, which is quite healthy,” said Chief Financial Officer Himanshu Mody in the call.

The fund-raise aims to slash the company’s debt but also fund capex requirements along with easing out the working capital.

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