SUZLON CASE

CASH
OR
CRASH

APPLICATION OF SIX BOX

MODEL

Submitted to: - Prof. Roopa Rao

Submitted by: - Binitha Nair (38)

Problems in Suzlon:
• Unable to repay debt: Rise in Debt in the organisation due to rampant
Acquisitions, which is not the Tanti’s way.

• Unable to repay Short term loan of $1 million taken to fund RE-Power’s

buy.

• Making losses which made Suzlon on the verge of defaulting payment

and generating no cash by which they can slowly repay the debt.

• Leadership: Aggressive, bold, proud entrepreneur.

• Not accepting the decline at the initial stage and making themselves
realize that they are well-positioned.

• Raising money for repayment of short term loans and debt became
difficult due to credit crisis, vanishing liquidity in the market and fall in
stock markets.

• Slump in Demand: Orders of wind energy equipment from US and

Europe which are the main markets evaporated.

• Power companies who are the main buyers of wind energy equipments
could not tap bank loans to fund wind turbines. By March 2008
demand dried up.

• Overlooked the quality: Customers in US complained of blades crack in

high winds and don’t deliver the power output. Nearly on 1150 blades
complaints were received. So orders were cancelled or held back.

• Managers Exit: Group CEO left due to lack of autonomy.

Six Box Model
Purpose: What business you are in???
• Suzlon was conceptualized by Mr. Tanti in 1995 when he decided to
enter the wind energy business. Suzlon is a company which deals in
providing wind energy equipments. Its main customers are US and
Europe.

• They were aggressive and street smart at the initial stage and were
not averse to acquisitions.

• They acquired Hansen and RE Powers which they thought would help
them in growth.

• Even though acquisition made Suzlon Asia’s largest and world’s third
largest wind energy equipment company, it was loaded with debt of
$14870 crore.

Structure: How do you divide the work???

• Suzlon has operations in 25 countries.

• Suzlon was controlled by an aggressive and bold entrepreneur.

• Because of his aggressiveness, two of the group CEO’s left suzlon due
to lack of autonomy.

• Resultant effect:- After they left Tanti tried to prove himself true and
changed the management system to decentralized one. Each country
has a management team which operates like a special business unit.

• RE Power and Hansen has their own managements.

Helpful Mechanisms: Coordinating Technologies

• Due to overlook of product quality, they had to withdraw turbine
blades from the market because blades crack in high winds and don’t
 deliver the power output. They cannot support the extra weight of ice
on them. These complaints by US customers ruined Suzlon’s situation.

• Suzlon spend $100 million fixing the problem.

Relationships: How do we manage conflicts among people
and with technologies???
• Conflicts arose between Group CEOs and Tanti.

• Group CEO Andre Horbach and Patrick Krahenbuhl left Suzlon due to
lack of autonomy.

• It raised questions on Tanti’s willingness to delegate and ability to

build a global business.

• Suzlon had good relations with the lenders. When Suzlon was unable
to pay the debt they came together and rework its debt. They made it
cheaper and gave Suzlon a moratorium on principal repayments till
March 2012.

Leadership: Does someone keep the balance in the

boxes???
• Most of the problems can be picturised due to the Leadership effect=
Tanti.

• He was too proud and too full of bravado to concede.

• When Suzlon was bleeding with debt crash, Tanti was not ready to
accept it and behaved with the belief that it was well-positioned.

• Tanti needed cash for survival – Bitter Truth- but wasn’t ready to
accept.

• He was aggressive, street smart and was not averse to making

acquisitions.

• When Tanti felt the India wasn’t large enough to satisfy his growth
aspirations, he went on a roll and acquired Hansen and RE power.

• He overlooked Quality because his major focus was expansion which

was the major blow to Suzlon.
• One of the official quoted that “Suzlon is a glaring example of native,
aggressive entrepreneur who got trapped in his vaulting ambitions.

• Tanti debuted as an entrepreneur at the age of 18 when he sold water

from his family tube well to cash in on a water crisis in Rajkot. This
shows his naïve mind and his street smartness.
Rescue Steps:
• The consortium of Suzlon’s lenders refinanced its loans, removed
restrictive conditions and excused Suzlon from repayment for two
years. The loan repayment resumes in March 2012 by which it is
expected that Suzlon will generate positive cash for repayment.

• The debt restructuring was done which involved 24 banks ans was
coordinated by four financial advisors led by BBI Caps.

• They converted Suzlon’s Rs.3000 crore foreign currency loans to rupee

loan from SBI.

• It is expected to gain advantage from RE Power which will help in off

shore segment.

• Moreover Boston Consultancy Group is helping it improve its business

processes and has reduced its working capital by Rs. 1000 crore to Rs
4000 crore.
 Action Component
Something is broken== corrective Action.
• The Equity and Debt composition required in Suzlon is broken.

• For financing RE Powers and buying it Tanti borrowed a short term

loan of $1 million which Tanti thought he would repay it by generating
cash from the markets.

• But at that period the credit crisis arised and Stock market fell.

• The liquidity in the market vanished.

• This led to a serious problem and led to inability of repayment of loans.

Corrective Action:-

• The consortium of Suzlon’s lenders refinanced its loans, removed

restrictive conditions and excused Suzlon from repayment for two
years. The loan repayment resumes in March 2012 by which it is
expected that Suzlon will generate positive cash for repayment.

• The debt restructuring was done which involved 24 banks and was
coordinated by four financial advisors led by BBI Caps.

Features out of Alignment == Alignment Interventions

• There were complaints by US customers complaining about the turbine
blades.

• Complaints on 1157 blades were received from customers to Suzlon.

• They said blades crack in high winds and don’t deliver the power
output as said in the sales contract. They cannot support the extra
weight of ice on them.
Alignment Interventions:-

They withdrew blades from the market. Suzlon spend $100 million fixing the
problem.

Vision: Change in Vision/ How changed/ what

strategies???
• In initial period of 1995, Suzlon was controlled by a aggressive and
street –smart entrepreneur who was not averse to making
acquisitions.

• Even though acquisition made Suzlon Asia’s largest and world’s third
largest wind energy equipment company, it was loaded with debt of
$14870 crore.

• But soon he realized that India wasn’t too large enough to satisfy his
growth aspirations.

• So he entered global arena and acquired Hansen and Repower.

• Thus there was a change in vision of entering global market for

growth.

• But it didn’t suffice to the wishes of Tanti.

• It more resulted into a cash crunch situation problems which lead to a

serious of problems discussed earlier.
Conclusion:
Thus it can be seen that Tanti and Suzlon have to work hard to strive this
hard phase and some greener effect in seen in the second half when demand
came up and it is expected that Suzlon will reach a Break even by March
2011 and the two year breather on principal amount is also an advantage to
Suzlon.

Now it is to be watched what steps are taken by Tanti for Suzlon or will
Suzlon take steps for Tanti.