Suzlon to sell Senvion to US PE firm for Rs7,154 crore3 min read . Updated: 21 Jan 2015, 01:53 AM IST
The deal, valued at 30% less than what Suzlon paid for the German firm in 2007, is to help it retire high-cost rupee debt
Mumbai: Suzlon Energy Ltd, the world’s fifth largest wind turbine maker, will sell its German subsidiary Senvion SE to a US-based private equity firm, Centerbridge Partners LP, for ₹ 7,154 crore to reduce debt, according to two people familiar with the development.
Suzlon is expected to retire its high-cost rupee debt and save more than ₹ 500 crore in interest cost as a result of this sale, they said.
A formal announcement is expected shortly. On 30 September, Suzlon Energy had a total debt of ₹ 17,323.23 crore on a consolidated basis.
The Economic Times on Tuesday reported Suzlon Energy would be selling Senvion to Centerbridge Partners for about ₹ 7,150 crore, citing unidentified people.
The deal is valued at at least 30% lower than the price Suzlon paid to buy Senvion in 2007, according to one of the two people cited above.
Centerbridge did not respond to an email. Suzlon did not respond to phone calls.
Suzlon Energy chairman Tulsi Tanti on 10 January said the company’s rupee debt stands at ₹ 8,000 crore and it will be reducing it by 50% by the end of this financial year.
Suzlon Energy also has an equal amount of debt in foreign currencies.
Experts had hailed Suzlon’s Senvion acquisition as a smart move to gain the latter’s technological expertise and access to European markets. Senvion is one of the most profitable assets for Suzlon Energy.
The first person cited above said Senvion has made multifold returns for Suzlon Energy in the past.
According to a presentation, Senvion revenue gained four times since its acquisition and profit grew eightfold.
Senvion has also entered new high-growth markets such as the US, Canada, Australia, Romania, etc., the presentation dated 31 October posted on the company’s website said.
Shares of Suzlon Energy rose 0.9% to ₹ 17.64 on BSE, while India’s benchmark Sensex rose 1.85% to 28,784.67 points.
In February 2014, Suzlon Group unit REpower Systems SE changed its name to Senvion SE. The company has been using the name REpower under licence from a Swiss company since 2001.
“Tulsi Tanti was planning to sell Senvion since the last two to three years. At one point, he also had plans to list the company. But since these plans did not work out, the lenders may be pressurizing him to sell Senvion and retire the debt. But the question to ask is: Will this sale really help the company to retire its massive debt? Will the existing business be able to serve the remaining debt," said S.P. Tulsian, a Mumbai-based independent stock analyst.
“Also, when he bought Senvion, he had a long struggle to buy the entire stake and had said that it is a pricey asset. But now, with the sale, the total purpose of his objective will be defeated. All debt-laden promoters have done this and lost vision of their businesses," he said.
“If he had sold Senvion around two or three years back, they were getting a good valuation and at least would have saved on the interest cost, but the timing to sell it right now is also wrong," Tulsian added.
The second person cited earlier said Suzlon Energy is primarily looking to lower debt at this point of time and it will focus on India and other select emerging markets for growth prospects.
In May 2014, Suzlon Energy had announced a restructuring of its existing foreign currency convertible bonds (FCCBs) worth $485 million for five years, after nearly one-and-a-half-years of complex negotiations with bondholders.
The Pune-based company has four different series of FCCBs issued to investors.
Suzlon had failed to repay $209 million of debt on 11 October 2012 after bondholders rejected its request for a four-month extension. The default was the biggest on convertible bonds by an Indian firm. As part of the restructuring, Suzlon Energy will issue approximately $485 million of bonds and the new restructured bonds will have a maturity period of five years and one day from the date of issue. These bonds will mature in 2019-20 fiscal year, the company said.
Suzlon Energy has four series of FCCBs of $200 million that was due in October 2012, FCCBs of $20.8 million due in October 2012, FCCBs of $90 million due in July 2014 and FCCBs of $175 million due April 2016.
Currently, Suzlon Energy is going through a ₹ 9,500 crore corporate debt restructuring exercise. In January 2013, Suzlon’s lenders, a consortium of 19 banks, agreed to enhance working capital facilities to the group by ₹ 1,800 crore and announced a 10-year deferred repayment plan.