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9th December 2012 To, CDR Members, Mumbai

Dear Sir, I am writing this letter regarding the malafide use of discretionary powers by the senior management of Public Sector listed banks led by State Bank of India, Bank of Baroda and others in Corporate Debt Restructuring of Suzlon Energy Limiteds (SEL) massive public debts primarily owned to State Owned Banks. The malafide use of discretion by SBI and other lenders to SEL is clear from the fact that just a few months back a consortium of State owned Banks had lent about USD 36O million to repay the FCCBs redemption which SEL was about to default. Thus the banks even at that time knew of SELs financial health but choose to ignore the same and lent the referred sum at significantly higher interest rates. The higher interest rate charged by the consortium and short term duration was only a ploy to justify lending to a dying organization - SEL. Now the very same Banks would be offering a concessional interest rate to SEL, moratorium period and reduction in interest rates under CDR. It is surprising that the banks which lent significant sums just a few months back now consider SEL to be on brink of default and in dire need of a massive restructuring.

The Reserve Bank of India (RBI) circular dated 23rd August 2001 whereby all Commercial Banks were informed of Corporate Debt Restructuring (CDR) mechanism which has an objective to ensure timely and transparent mechanism for restructuring of corporate debts of VIABLE CORPORATE ENTITIES affected by EXTERNAL and INTERNAL factors, outside the purview of BIFR, DRT and other legal proceedings, for the benefit of all concerned. I am below providing facts which point to a bleak future for Wind Energy and thus viability of the business for companies like SEL would be impossible. The company is not only mismanaged but ring fenced by Tanti Family owned companies which provide services to SEL at inflated rates with full support of SEL in terms of financial advance, manpower and dedicated business. These companies declared as Related Parties thrive only on single customer SEL and make unbelievable profits. A detailed police complaint is lodged against SEL Management including Tulsi Tanti, Kirti Vagadia & family members and associates of promoter family who operate such related parties of massive diversion of funds from SEL to such family controlled companies. The matter is before High Court at Mumbai. The details enclosed in the complaint mention diversion of more than Rs 650 crores in just three years 2006-2009 and this is only the tip of iceberg and the real siphoning could be much more. It is estimated that the promoters with active help from Kirti Vagadia and others have diverted up to 2000 crores during the last few years by adopting unfair practices and diversion of funds. These siphoning of funds which is listed in the police complaint is one of the reasons for poor financial health of SEL and one of the real reasons for FCCB default. The complaint and writ petition before High Court, Mumbai is enclosed for

ready reference. The details therein establish SEL as a wilful defaulter and therefore not to be considered for CDR. In the event of Banks deciding to go ahead with CDR, it may be considered that the banks have agreed to write off the entire debt lent to SEL as the extended period of time for debt repayment and interest moratorium would give the promoters another chance to siphon whatever is left in SEL. The banks in this ultimate scenario would be liable to answer to the public their decision to go ahead with CDR despite full knowledge of not only the future scenario of wind energy but also the wrong doings/siphoning of funds by the promoters. In fact in the ultimate case of Banks approving the CDR mechanism for SEL with the promoters being asked to bring in additional funds, it may be noted that the funds which the promoters would bring in would be the funds diverted/siphoned from SEL and invested in companies like S E Shipping Lines Pte Ltd, Singapore, Synefra Engineering and Constructions Limited, Sarjan Realities Ltd etc to name a few known entities where diverted/siphoned funds have been invested. In other words, these funds would constitute in all probability to be proceeds of crime earlier committed by the promoters and could be seized by the Enforcement Directorate as and when they start investigations into the matter. Notwithstanding the merits of the arguments regarding malafide use of discretionary powers by Senior Management of State Owned Banks, various reasons are given below to indicate that there is no Public Interest in allowing such Debt Restructuring: 1. Reference is invited to RBI circular dated 23rd August 2001 wherein one of the objects for CDR is mentioned as transparency whereas in the instant case the entire case is shrouded in mystery and smack of extraneous dealings.

2. It is unheard of that Deputy Managing Director of a State owned Bank would issue a public statement to support a company without verifying the reasons for FCCB default. The timing of the Public Statement by Deputy Managing Director is extremely relevant and a pointer to conspiracy as without this statement prior to actual default by SEL on its FCCB commitment, SEL would have collapsed as the financial institutions with whom Tantis have pledged their shares would have sold the shares in open market due to sudden and sustained downward correction in SEL share price which was trading just a shade above the threshold level at which shares have been pledged by Tantis with these financial institutions. It is important to know that on 12th October 2012 after SEL default on FCCB on 11th October 2012 ( announced after trading hours), the shares price did not slide as much only because SBI announced its support SEL on 11th October 2012 itself even before SEL announced default on its FCCB obligations. 3. The entire balance sheet of SEL need to be forensically examined to see if the transactions are true or are a cover up for diversion of funds. The Police Complaint which carries more than 500 pages of evidences of diversion may be tallied with internal records to verify authenticity of internal records. 4. The assets as declared in the Balance Sheet include inventory a substantial portion of which is more than 2-3 years old and/or relating to models which are unused, thus scrap but is considered at purchase price.

5. The assets, specially the factories are overvalued as most of the contracts for setting up factories were given to Tanti Family controlled companies thus work contracts given at inflated rates thereby over valuing the factories by more than 30%. A market valuation of all assets of SEL is an absolute must. 6. State Owned Banks are secured lenders, as such the Banks have no need to do any CDR and they could take custody of the assets for recovery of dues. 7. The CDR by State Owed Banks which are already reeling under increased NPAs and which has resulted in many rating agencies lowering Credit Ratings of such Banks, would only further increase the NPA in near term thus adversely affecting asset quality of the State Owned Banks and would further affect their fund raising capacity due to poor performance. Such actions would also affect the Stock Performance of the Banks thereby affecting the ordinary investor who is not aware of such mala fide exercise of powers. 8. In the instant case of Suzlon Energy Limited, the statement made by the Chairman of State Bank of India indicating that there is a mismatch in credit period (loan tenure which is about 5 years) and the life cycle of the wind turbines (which is 15-20 years) supplied by SEL and that is the main reason for the cash crunch the company is facing. Whatever be the meaning of this statement, it only goes to show that the banks have not understood the business

and financials of SEL and therefore there is a need for even more caution in extending any facility of relaxation of conditions. There is every likelihood that the borrower has misrepresented the facts to the Banks due to which the business is not yet fully understood by the lending Banks and therefore any decisions would be based on incorrect facts and exposing themselves to higher risks. I would like to only add that the life cycle of the wind turbines of 15-20 years is duly considered in the loan given to the end customer and these loans are for 10-15 years period accordingly. However, SEL is only an equipment supplier and not a Independent Power Producer and needs assistance only for the working capital duration which is usually 3-6 months period only. 9. The banks have no reason to extend additional facility and/or softening of terms of earlier loans for the simple reason that in an economy of the kind and extent as India, the banks dont have to look for good companies to extend loan to, there are many, with better business prospects and more transparent working and where the banks would be more secure. If the situation was that the banks were flush with funds with no takers of loans, the banks could then possible be more accommodating of companies with complex business models, environment and opaque working. But as is well known, it was State Bank of India chairman who demanded that CRR be reduced so that more funds were available to banks to expand their business. 10. It is well known that Banks have been very rigid with

recovery of its loans extended to small time businesses and also to

individuals and after a few defaults the banks are known for resorting to taking possession of property and then selling the same to recover the dues. It is most certain that in majority of such cases, it is the economic hardship and cash flow issues which make such individuals and small business enterprises to default on loans taken however the banks dont consider their request for restructuring favourably but when big business houses with massive debts come calling for help, banks kneel and extend every possible help. 11. In any CDR the banks involved must analyse the business

environment, prospects and model being followed by a company seeking CDR. In case of Suzlon the business entirely depends on Government subsidies/assistance. Irrespective of whether business exists in Europe, USA, South America or India/Asia, the sustainability of Wind Energy depends entirely on Government subsidies/assistance and knowing the present Government deficits in USA, Europe, India and the rest of the world, such subsidies/assistance will not be forth coming irrespective of global warming concerns. The Kyoto protocol is not ratified and Denmark Summit has remained inconclusive. Therefore the business will remain under pressure in medium term. Thus obviating the need for banks to offer CDR when in near term the business in not viable at all. There is higher possibility of the Loans turning NPA in real term than chances of company reviving to pay the loans.

Now coming to specifics of the CDR which Public Sector Banks led by State Bank of India are considering for Suzlon Energy Limited. The below arguments clearly set out that there is no justification whatsoever for extending CDR to Suzlon. 1) Suzlon committed the largest debt default in corporate India history by failing to honour the FCCBs, the last date for which was 12th October 2012. It may also be noted that all times during press briefings in 2011 and early 2012, Suzlon has informed that they are confident of meeting the obligations through internal accruals. Till the actual default there was no whisper of Suzlon seeking any Debt Restructuring, however, surprisingly the Deputy Managing Director of State Bank of India made a statement even before Suzlon officially defaulted on FCCB repayment obligation that SBI will consider Debt Structuring for Suzlon. This statement is surprising from the largest Public Sector State owned bank as such statements are not issued for other companies who are in the brink of default. 2) Suzlon officially defaulted on 12th October 2012 evening on FCCB obligation and on 29th October 2012 announced that a plan for CDR was submitted however the bank (SBI) announced much earlier that it was willing to restructure debt of Suzlon. It assumes extreme significance in light of the fact that the promoters of Suzlon, the Tanti Family which owns almost 52.5% of companys total shares and by virtue of which Mr. Tulsi Tanti is CMD of Suzlon, has pledged almost 98% of its stake and the base price for such pledging is about Rs 15/share. The share

price as on 12th October 2012 was Rs 15.50/share and the news of default would have most certainly brought down the share price to below Rs 15/share which would have trigged an additional share pledging by the promoters and a price below Rs 14/share would have resulted in the promoters having to pledge his familys entire stock and any further reduction would have triggered selling by pledge holders and the same would have further deteriorated the share value triggering massive sale and collapse of the company. It is in this light that the statement of Managing Director of SBI needs to be seen. Thus the statement of SBI Deputy MD appears to have discreetly helped SELs promoters which could not be without a reason. The banks are not supposed to announce unilaterally its intention to do CDR without there being any formal request for the same and without formal admission by other members. It amounts to misconduct and a serious conduct at that. 3) Suzlon in its Press Release has given out the broad terms of its CDR which include principal payment spread over additional 10 years and moratorium on interest and principal repayment for two years. Apart from this Suzlon is also seeking additional working capital. The details here below give thread bare analysis of Suzlon: A. Suzlon has been consistently misleading the investors and the banks about its alleged USD 7.2 Billion order book. Most of the declared order does not detail the shipment period/execution year of the order. The

announcements do not inform whether any advance against those orders is received or not and most importantly the announcements do not disclose the price at which the orders have been obtained to let the analyst and investors know whether the orders have sufficient margins or have been obtained just for the purpose of building order book. This lack of transparency specially when the company is needing assistance from lenders and that too a significant assistance, gives rise to doubts about its alleged order book and margins and advance against these orders, if any. The case in point are orders announced from Andhra Pradesh Government, Gujarat Government, Caparo Group, Techno Electric etc, totalling about 6000 MW out of which only about 500 MW was installed until 2011/12 and therefore such orders are nothing but frame agreements with absolutely no advance and no timelines for implementing the orders and therefore only paper orders not worthy of any consideration by Banks to lend against such phantom order book/orders. Suzlon has never announced periodic progress in these big orders and therefore it could be assumed that the company has much to hide. A public listed company with significant loans from banks and huge funds raised from Public is expected to be transparent and declare the true state of its affairs before seeking CDR.

B. The company states that it has strong order book of USD 7.2Billion and therefore robust future. It needs working capital for fulfilling the orders and also interest and principal moratorium to be back on track. The fact remains that the same SBI which is by far the biggest lender to Suzlon had done Debt Consolidated and Refinancing Agreement in February 2010 wherein under existing facilities to the tune of Rs 10,624 Croroes were refinanced by a syndicate of 22 banks and most of these banks including SBI extended 2 year interest moratorium. The company then spent Rs 259 crores towards consultancy and processing charges for the above. Even at that time the company given business projections which it has failed to achieve. The company claimed to have significant order book even then but it remains on paper with hardly any significant execution. This raises serious doubts about the so called order book. C. The working capital shortage is not because of huge order book but because the company has been practising aggressive marketing and accounting polices wherein goods are shipped way ahead of their required date by the end customer. The case in point is shipments to Brazil where the goods shipped by Suzlon had to remain at port for almost a year before being accepted by the buyers but Suzlon booked both sales and profits on the same in the quarter it shipped. There were similar incidences in India and

USA as well. Thus working capital was blocked in unproductive /ahead of time shipment. There is every likelihood that in future too the company would resort to such aggressive marketing and accounting to keep the banks and other investors satisfied. It is well understood that the orders announced by Suzlon in the last 12 months which amount to about USD 7.2 bullion, most of these orders are for Suzlons subsidiary RePower. The German banks have given sufficient working capital to RePower and therefore RePower does not need any working capital. Suzlon has done 2800 MW sales during 2008-09 and could with whatever working capital sanctions it had however now when it is only doing 1500-1600 MW annually; it claims it needs working capital? It clearly leads to the allegation as mentioned at point A wherein goods have been delivered to customers much ahead of its requirements to show advance sales and book profits. D. The companys balance sheet and business model is not commensurate with realities is evident from the fact that many of Nationalised Public Sector State Owned Banks, as per Suzlons own admission, had refused to deal with it directly and in fact asked Suzlon to come through brokers M/s. Money Matters Financial Services Limited, a company involved in bribing Public Sector State Owned Bank management. The charge sheet filed by CBI has

named Suzlon as one of the largest beneficiary of loans received through such corrupt practises which is to the tune of over Rs.3000 crores. It is noteworthy that Punjab National Bank which was one of the banks named by CBI whereby bribes were received had lent significant funds to Suzlon. The current CDR includes even these funds which were lent to Suzlon by Indian Banks adopting allegedly corrupt practises. Therefore it follows that Suzlon does not believe in fair play and has much to hide which is why it involves itself in such practises and the same is further corroborated by the fact that within 3 years of obtaining such loans through corrupt practises Suzlon has gone back to the same banks seeking CDR. E. Suzlon has cheated another majority State Owned company IDFC to the tune of almost Rs 300 Crores. Here again the officials of IDFC are hand in glove who despite having been pre warned acted in cohort with Suzlon and attempted to justify the transaction. To briefly mention the transaction it is suffice to say that Suzlon was seeking funds for its 100% subsidiary SE Forge Limited (SFL). SFL had a business plan and the quantity and price of purchase for products to be manufactured by SFL was decided on the basis of SELs past long term import purchase price of same products. The public document prepared by YES BANK and Suzlon for seeking finance met with no response because the cash flow and profitability was

not sufficient to justify the premium that SFL was seeking. Therefore the contract entered into earlier was amended to vastly increase the quantity of purchase and also the purchase price so that the value of SE Forge Ltd was artificially inflated. This was resisted by the entire management including the CEO & COO of Suzlon Energy Ltd except Kirti Vagadia and Tulsi Tanti. It was then suggested that the amended contract between SEL and SFL should have a side letter which stated that the amendments are done only for purpose of third party (financier) and will not be binding on SEL. Basis on this SFL approached IDFC who agreed to buy approx 17% of SFL equity for Rs 430 crores in Oct/Nov 2008. However even after two years i.e.2010, SFL failed to achieve either the sale quantity or the price and incurred heavy losses. IDFC was informed of the fraud committed on it by Suzlon by submitting a forged contract. IDFC realising that the matter may be a can of worms, decided to swap shares of SFL with 3.19 crore shares of Suzlon Energy at Rs 71/share. This price of Rs 71/share offered by Suzlon to IDFC for swap was not the price of share any time around the time when the transaction was completed. This swapping resulted in IDFC losing more than Rs 200 croroes in this transaction. The agreement for purchase of Suzlon shares by IDFC is enclosed herewith, has a cooling off period of 1 year and today

the share of Suzlon is Rs 16 which translates to a loss of more than Rs 300 crores. The conspiracy is clear because IDFC instead of seeking full amount extended to SFL on the basis of forged contract which Suzlon and SFL knew would not be performed, agreed to swap shares causing loss to both shareholders of IDFC and Government of India. All this happened despite IDFC having been informed of the fraud, pursuant to this information IDFC instead of exerting its rights for claiming the full amount financed and damages, choose to buy shares of Suzlon which it knew very well would not performance well and there was all negative news about Suzlon at the time of swap. In fact in a conversation that Senior Management of IDFC had with Yes Bank which represented SFL/Suzlon in dealing with IDFC and which was referred to Kirti Vagadia CFO of Suzlon, the senior management of IDFC had remarked that in purchasing the equity of SFL at elevated price IDFC was proving to be the only Bull left in market as far as Suzlon was concerned thus proving full knowledge of status of Suzlon. F. A complaint lodged with Police in Maharashtra which is now pending before High Court at Mumbai for non registration of FIR, evidences have been produced of massive diversion of funds from Suzlon to Tanti family owned companies in utter violations of all corporate ethics and companies act. The

allegation include giving business to Tanti family owned companies like Synefra Engineering and Constructions Limited (SECL), India, SE Shipping Lines Pte Ltd, Singapore, Sarjan Realities Limited, India, at up to 300% higher rates than prevailing market rates of similar /same services and that too with entire due either as advance or by way of Guarantees or Inter Corporate Deposits. SECL which developed Mangalore SEZ for Suzlon earned a massive 48% profit while similar SEZs developed by constructions giants like L & T, DLF and others earned a meagre 8-10%. IDFC the entity in nexus with Suzlon advanced almost Rs 400 crores to SECL which has gross revenue of 300 croroes annually and hardly any asset base. G. The company Suzlon is a master in misleading one and all and the same is evident from the fact that the company has been making tall claims about its financial health. The company in its annual accounts and in all subsequent announcements has been stating that its share premium reserve is sufficient to take care of FCCB obligations. In fact as late as in May 2012 when Suzlon paid its earlier FCCB obligation amounting to USD 320 million, it made a categorical statement that even the next tranche of FCCB repayment due in October 2012 would be paid and the company had made arrangements for repayment of the same. However the reality is now

known to all that the company could not pay as it does not have any cash to repay. Thus lenders and investors have been misled into believing the good health of the company. When the company paid its last tranche of FCCB in May 2012, the share price jumped to Rs 19 on the promise that the next tranche also would be paid. Thus investors have lost significant amounts due to such continued misdeclarations by Suzlon and the same amounts to fraud and cheating. The purpose for all these mideclarations remains same of keeping the share price above Rs 15 so that no additional pledge trigger is initiated and any further slide in share value would erode the promoters stake in the Company. H. The company in its red herring prospectus and subsequent prospectuses for raising debt by way of FCCB, GDR etc had made incorrect statements of not having any control over its associates however the realities are that the promoters conspire together with senior management and other directors, relatives and friends to divert funds from SEL to other promoter & family controlled companies.

It is equally unethical that SBI subsidiary SBI CAPS which acted as lead coordinator for arranging funds for SEL to pay last FCCB obligation of USD 360 million in June/July 2012 is now again acting as facilitator for Debt Restructuring of SEL. Very surprisingly the same agency i.e. SBI Caps

will be giving two entirely different versions of story for assisting an company like SEL and that too within a short span of 4 months? The matter has also been reported to Ministry of Corporate Affairs and I understand that they have also ordered an independent enquiry in to the matter and have written to Suzlon Energy seeking replies to various questions. In light of above facts and extraneous influence and consideration by SBI and other nationalised banks in extending softer terms to Suzlon including CDR, the same should be restrained so that the Government of India and the investors in such State owned, Public Sector Banks do not suffer losses entirely due to malafide exercise of discretionary powers by the management of such banks.

Yours truly,

Rajgopalan Sridhar

Sanjeev Bangad