MUMBAI: Suzlon Energy Ltd., the world’s fifth largest wind turbine maker, on Thursday said it plans to sell its entire stake in its unit, Senvion SE to a US-based private equity firm Centerbridge Partners LP.
Suzlon will be selling Senvion for one billion euros or Rs 7,200 crore in an all cash transactions and will also earn an additional Rs 360 crore.
The company is selling the unit to be able to reduce its debt and also focus on the home market, other high growth markets such as the US and emerging markets such as China, Brazil, South Africa, Turkey and Mexico.
The transaction is likely to be closed before the March 31 fiscal year ending, and will help the company reduce its interest cost and grow its business.
The company also requires approval from its corporate debt restructuring (CDR) lenders. Of the Rs 7,200 crore the company will be re-paying Rs 6,000 crore to banks and financial institutions.
“We will focus on high growth markets such as India, the US and some emerging economies,’’ said Tulsi Tanti, chairman of Suzlon group.
“The government’s thrust on renewable energy offers conducive policy framework to the sector which Suzlon is best equipped to capitalise. With our market leadership, right technology, proven project execution capabilities and best in class services, we are best positioned to tap the high growth potential in home market. ’’
The sale will reduce Suzlon’s debt to Rs 7,500 crore from Rs 16,500 crore and halve its annual interest cost to Rs 800 crore from Rs 1,600 crore.
The company had defaulted on its obligation to foreign currency convertible debentures (FCCBs) of $209 million.
Last year the company had converted a portion of its foreign currency convertible debentures into equity, and thereby reducing its debt by Rs 450 crore and improved its debt-equity ratio.
Ironically, Suzlon had acquired 33.9 per cent in Senvion, then known as RePower Systems AG, for 1.2 billion euros. It gained full control in 2011 with a final price of around 1.5 billion euros.
Investors are not so sanguine about the company.
“A major chunk of their business is gone by the sale,’’ said Paras Bothra, research head at Ashika Stock Broking.
“It’s good that the highly leveraged balance sheet has now been de-leveraged and the company can now focus on its domestic business. Still, the one-time blue chip stock has turned into a penny stock.’’
Shares fell 7.45 per cent or Rs 1.28 to Rs 15.91 apiece on the Bombay Stock Exchange.
Tanti family and promoters own 32.22 per cent, while financial institutions own 34.18 per cent, with IDBI Bank owning 6.26 per cent.
“The global market environment for renewable energies is promising for a wind turbine manufacturer, particularly for one of the most experienced players in the industry with onshore and offshore capability,’’ Stefan Kowski, managing director of Centerbridge said and added that “We are confident that Senvion will continue its track record and, together with the Company’s management, we look forward to supporting its continued development as a profitable and growing company.”