The Suzlon stock appreciated by 59 per cent last week from Rs 44.45 to Rs 70.70 after the company said it was negotiating with Portugal-based Martifer for acquiring its 22.48 per cent stake in German firm REpower. The trading volume was brisk with 426.9 million shares changing hands.
Last week, Suzlon had suspended the Rs 1,800-crore rights issue, which was intended to help fund the REpower deal. According to recent reports, Suzlon may sell as much 5 to 8 per cent of its stake to private equity groups to raise some funding, raising investor hopes that the deal would be completed.
According to a research report, there is a rising risk to Suzlon’s wind energy business, with a massive downtick in oil prices, a delay in renewal of PTC in the US and difficulty in financing wind power projects. Access to REpower’s technology is critical in the face of a slowing order flow. The company has decided not to try to exercise the domination and profit-transfer agreement with REpower, owing to opposition from lenders, who will be financing the next rounds of growth for REpower.
However, with Suzlon struggling to bag any orders in the last six months, the next stage of growth at Suzlon will be powered by REpower’s technology (3-MW, 5-MW and 6-MW turbines), which looks unlikely in the short term.
