Mumbai: Suzlon Energy Ltd said on Monday that it has signed an undertaking with ZF Friedrichshafen AG, a German automotive component maker, to sell its remaining 26.06% stake in gearbox making Netherlands subsidiary Hansen Transmissions International BV for $187 million (Rs830 crore) in cash.
The move will make Suzlon’s balance sheet look better, help the company reduce debt and purchase the shares it doesn’t own in German industrial wind turbine maker REpower Systems AG, analysts said.
ZF, a €12.9 billion company, which makes drivelines and gearboxes, purchased the stake from AE-Rotor Holding BV, The Netherlands, a wholly owned unit of Suzlon. The company will pay 66 pence a share for the stake.
“This is in line with our strategy to optimize and strengthen our balance sheet,” said Suzlon group founder and chairman Tulsi Tanti in a press release.
The agreement can be revoked if a third party bids at least 12.5% more or if current investors, Ecofin Water and Power Opportunities Plc and Ecofin Special Situations Utilities Master Fund Ltd, offer at least 10% more than ZF, Suzlon told the Bombay Stock Exchange (BSE).
Ecofin owns a 12.27% stake in the company.
Suzlon rose 3.02% to Rs54.5 on Monday on the BSE, while the benchmark Sensex rose 0.8%. Hansen was trading at 65 pence, up 91% from Friday’s close of 33.75 pence, on the London Stock Exchange at 9.30 pm IST.
“With the stake sale, Suzlon is not worse off from a supply chain perspective but better off from a balance sheet perspective,” said Mark Thompson, an analyst at brokerage Religare Capital Markets plc.
In the year ended 31 March, Suzlon’s loss accruing from its stake in Hansen was around Rs28 crore, according to an analyst presentation by the Indian company.
“Hansen, which also supplies to Gamesa Corporación Tecnológica SA and Siemens AG, has been struggling because end market conditions have not been so conducive,” said Thompson.
Suzlon, with a consolidated debt of Rs9,142 crore as of 31 March, has been reducing its stake in Hansen ever since it purchased the company in March 2006 for €465 million. Suzlon, currently the subject of a corporate debt restructuring programme drawn up by Indian lenders, reduced its stake to 71% in January 2008 when Hansen sold fresh shares to raise €440 million euros. Last year, British fund Ecofin Ltd. purchased 10% for Rs500 crore, further reducing Suzlon’s stake to 61%.
“Suzlon acquired Hansen at a time when there was a deficit in the gearbox market,” said Bhargav Buddhadev, analyst at brokerage Ambit Capital Pvt. Ltd. “Most of the cash raised from Hansen’s stake sale may be used to reduce its debt as it does not require a lot of money to acquire the remaining stake in REpower.”
Suzlon raised $175 million by selling foreign currency convertible bonds in April this year. It requires only around $85 million as per a company report for purchasing the 4.84% stake it doesn’t own in REpower, Buddhadev said.
REpower is primarily an offshore wind turbine manufacturer in which Suzlon had acquired a 33.85% stake in May 2007 and has progressively increased its stake to 95.16%.