Mumbai: “Indian wind turbine maker Suzlon Energy Ltd will set the terms of a planned rights issue to raise up to Rs18 billion in four to five weeks, after necessary approvals,” its chairman said.
Suzlon, which last week announced the rights issue, said the funds would be used to buy Portuguese conglomerate Martifer’s stake in REpower and for potential buyout of any minority shares that are offered.
Suzlon had earlier this month struck a deal for an early acquisition of Martifer’s stake in REpower for nearly $400 million. The acquisition, which will take Suzlon’s holding to 90%, is scheduled to be completed by 15 December.
“In view of the current market conditions, a rights issue is the best option to raise funds,” Chairman Tulsi Tanti said on the telephone, adding that some funds will also be used to meet Suzlon’s capital requirement.
“We have some headroom for debt, but we do not want to use that now,” he added.
“Suzlon’s founders, who hold about 66% in the company, will also participate in the rights issue,” Tanti said.
Higher borrowing costs have encouraged several Indian firms to opt for rights issues, but volatile markets have been a dampener. The benchmark index is down by more than a third so far this year, while Suzlon is down by more than half.
Suzlon shares were down 4% at Rs167.75 at 0457 GMT, their lowest in more than a year.
Indian companies had raised about $4.8 billion from rights issues until mid-August, Thomson Reuters data showed.
Tata Motors’ Rs41.5 billion rights issue opened on Monday, a week after Hindalco Industries’ Rs50.5 billion issue was launched.
Suzlon also said IDFC Private Equity would buy 17.1% in subsidiary SE Forge Ltd for Rs4 billion.
“SE Forge, which specialises in large-scale foundry and forging materials, is expanding capacity at its plants in Coimbatore in south India and Vadodara in the west to cater to the growing demand in the wind energy sector,” it said.
Suzlon will continue to hold the remaining stake in SE Forge.
“The wind energy sector is expected to maintain its high growth supported by increasing cost-competitiveness, high crude prices, thrust for green power and support from governments,” Luis Miranda, president and chief executive of IDFC PE, said.
Yes Bank was the adviser to the transaction.