By Archana Chaudhary, Bloomberg
Mumbai: Suzlon Energy Ltd., India’s biggest builder of wind turbines, said fourth-quarter profit rose by 21% on higher demand.
Net income in the three months ended 31March rose to Rs4.37 billion from Rs3.6 billion a year earlier. Sales rose by 33% to Rs20.98 billion, the Ahmedabad, Gujarat-based company said in a statement today.
The higher profit will help Suzlon, controlled by Indian billionaire Tulsi Tanti, fund a planned 1.2 billion euro ($1.6 billion) acquisition of German wind turbine maker Repower, which Paris-based Areva SA is also seeking. Suzlon expects to benefit from the acquisition by lowering the German company’s costs, thereby raising profitability.
Suzlon’s group profit rose to Rs8.64 billion in the year ended 31 March, compared with Rs7.6 billion a year earlier, the company said. Revenue in the year rose to Rs80 billion from Rs39.2 billion. Suzlon had total orders worth Rs94.86 billion, the company said.
Tanti was India’s eighth-richest person in 2006 with a net worth of $5.9 billion, according to Forbes Asia.
Suzlon bought a 7.7% stake in Hamburg-based Repower and offered 150 euros apiece for the stock outstanding. That’s 19% more than its original offer and a 7 % premium to a bid by Areva, the world’s largest maker of atomic power stations.
Repower said on 17 April it prefers Suzlon’s offer to Areva’s 140 euros a share bid. The same morning Areva extended its offer period, gaining extra time to consider topping Suzlon’s price.
The bid by Suzlon is being made in partnership with Martifer, a unit of Portuguese builder Mota-Engil SGPS SA that owns a quarter of Repower. The acquisition, if successful, will be Suzlon’s second major European buy, behind its $566 million purchase of Belgian gearbox maker Eve Holding NV last year.
Repower is fully dependent on outsourcing for components, and its raw material cost is 82% of revenue, compared with 62% at the Indian company, Suzlon’s head of finance Kirti Vagadia said on 10 April.
“I have two abilities, one is to reduce raw material cost and secondly to improve their volume,” he said. “Increased volumes will create better margins at Repower.”
Suzlon shares have fallen by 4% this year against the 1.3% gain of the benchmark Sensitive Index of the Bombay Stock Exchange on concern it may pay too much to secure Repower control.
Suzlon has an option to buy Mota-Engil’s stake in the German company, Tanti said on 9 February. The company has hired ABN Amro Holding NV and India’s Yes Bank Ltd. to help raise funds for the offer, which would be financed through long-term and short-term debt and from Suzlon’s own resources, he said.
Suzlon’s higher bid was based on the potential synergies with Repower “given our fully integrated business and control over component level technology and its integration with turbine technology,” Tanti said in April.