Suzlon Energy's shareholding pattern: A closer look

One of the promoters of Suzlon Energy, Samanvaya Holdings, sold 3.7 cr shares from its original holding of 7 cr on Friday, Nov 17, 2011. This constitutes 2.08% of the total shareholding of Suzlon Energy. The promoters' stake in the company has gone down from 54.97% in March 2011 to 52.76% as of today. Since the promoters' stake in the firm is very important, we have further researched upon the shareholding pattern.

We have taken a closer look at the company’s shareholding pattern for the last 3 years. The promoters' shares in the company, which stood at 65.89% in March 2008, have been declining in this period. Between June and September 2009, some promoters sold huge stakes in multiple transactions, as per the documents submitted to the stock exchange. This includes a heavy sell of 7 cr shares on a single day in September 2009. Further, the same shareholders intended to provide the funds to the company in the form of either debt or equity.

The share price of Suzlon Energy, which crossed Rs 320 in May 2008, came down to Rs 91 in September 2009. It has remained highly volatile,  and has never recovered from the bearish trend. In fact, it touched its lowest price on Friday Nov 17, 2011, when promoters sold more shares.

In the table below, we have captured some high volume transactions reported by the company to the BSE. However, one should take into consideration that there have been several transactions of smaller volumes which we have not provided in the interest of brevity.

When we further analysed Suzlon Energy's share capital in the last 4 years, we found that the company has also issued share capital on 3 occasions. In FY08, it issued 5.6 cr shares to QIBs at the price of Rs 1719 per share. It also issued 5.84 cr shares in FY10 at the price of Rs 89.55 per share. In FY11, the company issued 18.86 cr equity shares to existing shareholders at the price of Rs 63 and 3.2 cr shares to ‘IDFC Private Equity Fund III’ at the price of Rs 60. The total share capital, which was Rs 299 cr in FY08, increased to Rs 355 cr by March 2011.

From these 2 types of transactions, one can see that the shareholders' stake has significantly gone down, not only due to stake selling by the promoters but also due to the new equity injection. One should also note that apart from the selling of stake, promoters have pledged 69% of their total shareholding in the company. The company has a significantly high level of debt, which, we believe, is a significant risk to the business in this high interest scenario. This is another reason for investors to stay away from the stock.