The Rs 13,679 crore Suzlon has done the right thing by speeding up the purchase of Martifer’s 22.5 per cent stake in RePower for an estimated 270 million euro.
In other words, by mid-December, Suzlon should be closer to acquiring RePower technology and can speed up the integration of the firm with itself. Getting access to technology is obviously crucial for the wind energy player; moreover, it can now streamline its product portfolio, avoid duplication in some areas and also and chalk out a better marketing strategy.
Over the past couple of quarters, Suzlon’s order book hasn’t grown as fast as those of its competitors such as Vestas or Nordex which have seen orders increase by over 40 per cent. Part of the problem could be related to the supply of blades that cracked: Edison Mission Energy had cancelled half of its order earlier in the year. Earlier, Suzlon had recalled around 1251 blades which needed to be strengthened and for which the company had earmarked a sum of Rs 120 crore. However, both the Belgium-based subsidiary Hansen and RePower are doing well.
Since Suzlon will be borrowing to fund the purchase of the shares analysts estimate that the company’s net debt-equity ratio could be around 1:1 by the end of FY09. Should there be any slowdown in sales, it might result in a dilution of the equity.
The company is expected to close FY09 with consolidated revenues of close to Rs 20,000 crore and a net profit of around Rs 1,600 –1700 crore. At the current price of Rs 236, the stock trades at around 21 times estimated FY 09 earnings and is expensive.