It is a company under siege. The coffers are running thin at Suzlon Energy, India’s largest and the world’s fifth largest wind energy company. This entrepreneurial showcase of yesterday is squeezed today in a mountain of debt, dwindling order book and a pile of inventory and receivables. Precious cash is being sucked into repair work for its blades that cracked at customer premises in the West.
A rights share issue to raise the much-needed money for a protracted acquisition has proved a non-starter, while payment obligations are nearing. By end of May alone, Suzlon needs Rs. 1,200 crore and its options are drying up. Its founder Tulsi Tanti, until recently the poster boy of India’s globalisation drive, is thus staring down the barrel of a gun.
Suzlon has had to endure a punishing stock market too. Its share price fell from a high of Rs. 460 on the Bombay Stock Exchange (BSE) on January 9, 2008 to about Rs. 35 in a matter of 14 months. The recent rally has indeed doubled the price from that low, but the company is nowhere near being able to raise capital at will. Yet, if he tries hard, Tanti may have a couple of options to raise money. He has sold a 10 percent stake in one of his crown jewels: Belgian gear-box maker Hansen. There’s talk of selling more.
In April 2008, the Wall Street Journal broke the first in a series of seven stories on Tanti’s crumbling wind energy business. It talked of Suzlon-supplied blades that had developed cracks across various installations at Edison Mission Energy and John Deere in the US. This controversy took its toll on Suzlon’s order book. Edison, one of the firm’s first and biggest customers in the US, cancelled orders worth 300 MW. Clients like Iberdrola Renewables and Horizon Wind Energy decided to wait it out till the root cause analysis was complete.
“The problem is there and it has been a cause of great worry. But, the issue is getting resolved now,” said V. Raghuraman, an independent director at Suzlon.
Leadership Flux
As the storm on the blade failure incident raged, Tanti faced the brunt of a senior management exodus. Andre Horbach, the group chief executive officer (CEO) and Patrick Krahenbuhl, the group chief financial officer (CFO) quit within weeks of each other.
While both officials refused to comment on the reasons for their departure, company executives said their exit had a lot to do with the way Tanti went about driving his entrepreneurial venture.
A senior private equity professional who had invested in Suzlon says he noticed a distinct change in Tanti’s leadership style. “He was a hard-charging guy who led from the front. That’s why we chose to invest in the company. But one year after the IPO, I was surprised to find that he became a delegate-and-review leader,” said Ajay Relan, who headed Citigroup’s private equity arm in India until last year.
But then, insiders say that Tanti still retained a streak of micro-management in him, despite his wish to create the image of a professional multinational company.
SCHOOL OF HARD KNOCKS
(This story appears in the 05 June, 2009 issue of Forbes India. To visit our Archives, click here.)
Sure, what happened is not pleasant, but at least Mr Tanti had the Guts to go with his vision. And it also showed positively for sometime. now is the time for gumption, to understand, and gain market confidence. Market Confidence is important, in complicated technology. once market confidence is regained, everything else will turn around. After all, we do have the India advantage. But the weaknesses of India, i.e. less adherence to Standards etc, are not appreciated in world markets. Technical excellence, market confidence, if achieved, even now, investor confidence will get restored automatically. I wish Mr Tanti well. God give him strength.
on Apr 17, 2012when suzlon share will be turn around. what is the future of suzlon. how a retail investor can trust suzlon
on Aug 28, 2011why is suzlon taking time on the arrest of the employees,.2 employees of Suzlon are behind bars for the past 7 months who duped the company for 39 cr.TOI published the arrest on 10th sept 2009.Medi must give more information from Suzlon.
on Apr 5, 2010Suzlon's team has good entrepreneurship and perseverance to succeed. Corporate success is no roller coaster ride. So is with Suzlon.
on Oct 31, 2009Suzlon is one of the corporate run by great visionary Tulsi Tanti. Though this is the tough for Suzlon (maybe for any industry) in this economic downturn, Tulsi will bounce back strongly. There is bright future for green energy and wind energy has the great potential in that direction. I see no hurdles in overcoming in this tough time.
on Jul 2, 2009Mr Tulsi Tanti has the innovative aspect of idea and had more to do with the service he was providing than with any feat of engineering. But it was a concept that would revolutionize the wind energy business. Presently Suzlon is going through toughest challange ever, but I am confident that they will come out this as Mr Tanti is very great visinary. He is one of those first time entrepreneurs who saw potential in an inchoate idea, ventured into it, and made it big and he ranks among top 10 richest men of India.
on May 27, 2009Tanti bhai is a very humble man.. a man with big ambitions as every entrepreneur in India is.. yes, agreed that he may have tried to to run where he should have walked but he is well on his way to pluck out the thorns stuck in his foot while running.. the markets for green energy has unlimited potential and very less of it has been tapped till now.. and wind is one form which can be most rapidly utilised in comparison to solar (which is yet technologically evolving) and hydro (which has high executional challenges).. due to credit crunch the debts have been piled up and accesibility to capital was reduced, but the confidence is back and soaring.. and regarding the style of management, Tanti bhai gives a free hand to its management to establish businesses.. if that won't have been there then the expansion of Suzlon in such a small time won't have been possible.. lets wait and watch.. the soojh boojh Loan will make it big.. :)
on May 24, 2009Business processes may be limiting, but they go a long way in sustaining your growth. It's surprising to see how Tanti could possibly ignore that in an industry which needs them the most. This is a great case study for young entrepreneurs and managers.<br /> <br /> Also noticed an interesting point about the tax benefit schemes. Think its high time the Government starts focusing on rewarding value rather than the investment. I'm sure a lot of companies have been following a similar strategy as Suzlon - reckless investments without a sound valuation process, facilitated by the tax breaks they receive.
on May 23, 2009A good wrap up!! I do not understand how a product could by pass QC checks and be deployed at clients wind farm? Any thoughts??
on May 22, 2009Hi Ashish, Congratulations on your hard work. The final product looks marvellous which is a great achievement for the team. I think its brilliant the way your article unwinds the Suzlon story and is quite insightful. Look forward to many more such pieces which help us gauge more of the India Inc. Cheers, Priya
on May 22, 2009Hi i DONT THink suzlon will be a great company..It has got influential promoters but to cater to western market you need quality, if you have less quality you are out
on Feb 27, 2010