Wind turbine manufacturer, Suzlon Energy (SEL), has concluded the sale of its 26.06% stake in Hansen Transmissions International NV to ZF Friedrichshafen AG and exited the company. The completion of the deal will see Suzlon raising R890 crore from this sale. Tulsi R Tanti, CMD, Suzlon Group, says the sale marked an important step towards deleveraging Suzlon?s balance sheet.
The transaction follows Suzlon entering into an irrevocable undertaking on the July 25, 2011, with ZF Friedrichshafen AG (ZF) to accept the offer made by ZF for the entire issued share capital in Hansen Transmissions at 66 pence per share. This offer was at a premium of approximately 95.6% over the closing price of 33.75 pence per Hansen share on July 22. ZF acquired 174,632,079 depository receipts in Hansen for $187 million.
The sale is expected to strengthen Suzlon?s balance sheet, weighed down by debts of R10,000 crore and working capital constraints. However, there are no large debt payouts this year because of the moratorium. The next major payment comes in 2013. Further, squeeze-out of minority shareholding of its German acquisition, Repower, would give Suzlon access to some more funds and ability to leverage Repower balance sheet to raise funds. The company also got its shareholders? nod last month to raise up to R5,000 crore through issue of equity, bonds, GDR or other products to fund growth.
Suzlon acquired Hansen, a wind gearbox manufacturing company, in 2006 for US $435 million when Suzlon was entering the global wind energy market. Hansen was acquired to bolster Suzlon?s supply chain and give it control over key components and also become a well integrated player. However, this move did not work and Suzlon was looking at an exit route. It started selling stake in Hansen since January 2009 that culminated with this final sale to ZF.
However, brokerages have expressed long term concerns about e-debt repayment schedules that start in 2013. Also, the outlook for the wind industry globally is expected to be difficult due to market conditions. Paul Soares, Kenersys, Global CEO, in an earlier interaction had said there has been a decline in installations in the global markets in 2010 as the major markets find themselves in the midst of a financial crisis. ?Because of this, project financing has been hit and all this puts breaks on installation of wind turbines. The economic situation has slowed down the market and market shares will see a steep drop in the April 2011 to November 2011. Soares had said that wind was linked to government policies and with governments struggling people were not comfortable investing and that the environment made the business much more difficult.
Suzlon has said it has an order book position of about R13,000 crore and the company has given a topline guidance of about R26,000 crore this year.
A re-focus on the Indian and other emerging markets has helped Suzlon maintain order flows. The market has already factored the sale and the stock price closed at R37.75, 0.79% down from the opening price of R38 .25 on the BSE.