Its slapdash manner has come back to haunt India's largest wind energy company. It is a tale of caution for those going global
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.)