Suzlon Energy Ltd’s investment in Hansen Transmissions International NV was supposed to have been its trump card in tackling the mountain of debt on its books. The company had a net debt of Rs12,525 crore at the end of September and its stake in Hansen was worth close to Rs4,500 crore. While the company’s willingness to sell its stake in Hansen was known, the tricky part, of course, was to find a buyer at the right valuation.

Graphics: Naveen Kumar Saini / Mint

Most brokers had been valuing the Hansen stake at its average traded price of 140 pence per share in the past few months. But after Suzlon announced that it is looking to sell a 35% stake in the company, Hansen’s share price has fallen below 100 pence. At current prices, the company’s entire stake in Hansen is valued at about Rs3,200 crore. The stake sale may still happen at a slightly higher price, but it most likely will be substantially lower than the price of 140 pence most brokers had valued the stake at. What’s more, the company is selling the stake in a piecemeal fashion, which doesn’t augur well. Given weak business fundamentals in its core business and the pressure of debt repayments, it would have been better to sell the entire stake. But again, there seem to be constraints in getting an outright buyer for Hansen, given the current subdued demand for wind turbines and gearboxes.

Interestingly, Suzlon shares reacted positively to the announcement. They may correct once investors realize that the trump card hasn’t played out as well as one had expected.

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