Suzlon Shares Slide Despite Strong Order Inflow
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Pune based Suzlon energy has won another order worth Rs 305.32 crore to supply 24 units of S95-2.1 MW wind turbines to Gujarat Mineral Development corporation (GMDC). This order totals 50MW of capacity. In last two months company has seen a very strong order inflow which indicates that there is a strong demand for the wind power turbines in the country.
As per the presentation uploaded on the company’s website dated 11th February 2012 its total order book was 5755 MW worth USD 7.5 billion i.e. Rs 39000 crore. While we wanted to check the current status of order book its management remained unavailable. In last two months company has won orders of over 1500 MW capacity. We believe that the order book as of today stands over 7000 MW worth over Rs 50000 crore. We understand that company wills reports is March quarter earnings after 20th of this month and the management is in silence period.
Despite this huge order inflow the stock has not moved positively. In fact if we look at the stock on in last three months it has fallen by 29%. The prime reason is its huge debt as well as the FCCB obligation due in the next month. The market now expects decline in its Q4 profit. Besides the international orders may also decline going ahead as the economic enviornment remains very challenging.
Besides this recently it was reported by the news agencies that the company is seeking to raise USD 500 million bonds to repay its debt. Company will have to repay USD 389 million (about Rs 2062 Crore) of outstanding FCCBs. Total company has USD 654 million of FCCBs outstanding which amounts to Rs 3466 crore as per current exchange rate. Company by 31st December 2011, had reported a cash of Rs 678 crore on its books while net debt of Rs 12,072 crore.
| FCCBs | Outstanding Amount ($ Mln) | Conversion price (Rs.) | Maturity date | Coupon rate | Redemption Premium |
|---|
| June-12 Tranche 1 | 211.3 | 97.26 | June-12 | 0% | 145.23% |
| Oct-12 Tranche 1 | 121.4 | 97.26 | Oct-12 | 0% | 144.88% |
| June-12 Tranche 2 | 35.6 | 76.68 | June-12 | 7.50% | 150.24% |
| Oct-12 Tranche 2 | 20.8 | 76.68 | Oct-12 | 7.50% | 157.72% |
| July-14 New issuance | 90 | 90.38 | July-14 | 0% | 134.20% |
| April-16 New issuance | 175 | 54.01 | April-16 | 5% | 108.70% |
After selling two of its assets company was also in media to sale its major subsidiary REPower. Company has already tasted hot waters when its CFO left the job and the shares of the company tanked 3% on a single day. Beside CFO of REPower has also left recently on the difference on the future strategies. Now with high uncertainty we believe that high order inflow may not woe the investors.
At the moment it seems very obvious why investors are very bearish on the stock. There is high uncertainty where this company heading towards. We maintain our call to avoid the scrip.