Suzlon Energy's open offer to acquire 26 per cent stake

Dilip Shanghvi controlled entities and promoters of Suzlon Energy (Suzlon) will make an open offer worth Rs 2837.52 crore to acquire 26 per cent stake in the the company. Shanghvi controlled entities along with Tulsi Tanti and other promoters of Suzlon will make the open offer to the shareholders for purchasing more than 157.64 crore shares of face value of Rs 2 each at a price of Rs 18 per fully paid up equity share. The open offer will begin on December 28 and close on January 8, 2016. Earlier this year, Shanghvi decided to acquire 23 per cent stake in the company with an equity investment of Rs 1800 crore. Suzlon allocated 10 million of preferential shares to Dilip Shanghvi.

Suzlon manufactures and sells wind turbine generators (WTGs) and related components of various capacities. The company operates through three segments viz. sale of WTG, foundry & forging and others. It has approximately 10 manufacturing facilities in India, China and America.

Suzlon's shareholding pattern indicates that promoter's holding stood at 21.45 per cent, while institutional holdings stood at 29.93 per cent and non-institutional holdings stood at 48.4 per cent as of September 2015 quarter. After the open offer, old promoters holdings remained at 17.36 per cent. The acquisition will increase holdings to 42.49 per cent including 26 per cent from open offer. Acquires have already kept 22.03 per cent in the Escrow Securities Account in May 15, 2015. The others remained at 40.14 per cent.

The open offer will be able to raise cash for Suzlon which is important considering the fact that the company has a debt more than Rs 10801 crore as of Q2FY16. This offer would reduce the debt burden up to 21.82 per cent from its current level in the future.

Considering the Indian context, the installation stood at 23355 MW wind power as of FY15 out of which 37 per cent market share is dominated by Suzlon Energy. India is also planning to increase the wind capacity to 60000 MW by FY22. The planning is backed by various initiatives. This includes a green corridor in key states in a major way, apart from clean energy as priority sector lending.

Suzlon Energy has 1092 MW total order book amounting to Rs 6812 crore as of September 2015 quarter. The company's order book constitutes 85 per cent from independent power producer (IPP) segment while the remaining 15 per cent came from the Non-IPP segment. The strong order book is a drive towards the future performance of the company.

The share price of Suzlon increased by 3.89 per cent on bourses in early trades and is trading at Rs 20.55 on intraday basis. The Company's share price is consolidating between Rs 20 and Rs 25 for the past six months. The promoter's shareholding increment would render better prospects to the company.