Suzlon raises $552 mn to repay debt

Suzlon Energy, the country's biggest maker of wind turbine generators, has raised $552 million through a qualified institutional placement (QIP) to repay a part of the debt raised to fund the acquisition of Germany's REpower Systems. About 43 investors from around the world have subscribed to the QIP.

Suzlon's board approved the sale of 11.4 million shares for Rs 1,917 a share, the Ahmedabad-based company said in a statement to the Bombay Stock Exchange (BSE) today.

Post-placement, the promoter's stake in Suzlon Energy will be 65.91 per cent.

The company's euro 1.2 billion ($1.7 billion) acquisition of REpower this year and a euro 465 million purchase of Belgian gearbox maker Hansen Transmissions International last year have increased debt to 0.75 per cent of equity, straining Suzlon's balance sheet.

"We funded two large acquisitions by raising debt and that was a concern for our investors,'' Chairman Tulsi Tanti said in an interview. "Our balance sheet is more comfortable now.''

The share sale would bring down Suzlon's debt to Rs 5,275 crore, Tanti said.

Suzlon owed banks and financial institutions Rs 10,353 crore as on September 30, 2007, according to the company's share sale document filed with the Securities and Exchange Board of India.

Suzlon rose Rs 37.7 a share, or 2 per cent, to close at Rs 1,899.5 on BSE today.

Roughly half the funds would be used to repay the debt Suzlon incurred to fund acquisitions of REpower and Hansen Transmissions, Tanti said. Suzlon might also use part of the fund to buy REpower shares from Areva and Martifer SGPS., according to the document.

Suzlon beat Areva, the world's largest builder of nuclear plants, for REpower with a euro 1.2 billion offer in February this year.

A part of the fund raised today would fund further expansion, he said. Suzlon plans to spend Rs 2,600 crore on boosting generation capacity in India to 5,000 mw next year from 2,700 mw.

The shares sold amount to 3.8 per cent of Suzlon's total equity, according to the company's email statement.

"We expected Suzlon to dilute equity to remedy its debt burden, but had expected a better price,'' said Mukul Jain, an analyst at Mumbai-based brokerage Prabhudas Lilladher.

"The sale gives Suzlon better leverage for raising funds for its expansion plans.'' Jain has an outperform rating on Suzlon.

The company calculated the share sale price by allowing a 2 per cent discount to the average of Suzlon's share price in the last seven days, Tanti said. The price was at a 3 per cent premium to yesterday's closing price of Rs 1,861 a share.

The company had overseas bonds worth $500 million due for conversion into equity over the next 24 months, Tanti said.

This might add additional equity of as much as 4 per cent. Suzlon might raise more debt next year for its capacity addition plans, he said.

Suzlon will need to make an offer to buy a 30 per cent stake that Areva continues to hold in REpower next year, according to its takeover agreement.

A similar offer is required to be made the following year to buy out partner Martifer SGPS, the Portugal-based metal structures maker, according to Jain.

Martifer and Suzlon Energy hold 57 per cent of REpower Systems after a takeover offer for REpower.