Suzlon Energy confirms 23% stake sale to Sun’s Shanghvi

Suzlon Energy Ltd, the world's fifth largest wind turbine manufacturer, today confirmed media reports saying it has signed definitive agreements with Dilip Shanghvi Family and Associates (DSA) for equity investment of Rs1,800 crore in the company.

Shanghvi, the founder of Sun Pharmaceutical Industries, has agreed to buy a 23-per cent stake in Suzlon for about Rs29,000 crore, the company said late on Friday.

Shanghvi, India's second-richest man, will pick up 100 crore new shares in Suzlon, issued as a preferential allotment.

Shanghvi's investment firm and Suzlon will also form a wind farm joint venture for the development of 450 megawatt (MW) of wind farms, the statement said.

Loss-making Suzlon has been under pressure over the last few years due to a slowdown in global turbine sales and a growing debt pile. It was forced to restructure Rs180 crore of debt after defaulting on a Rs 20,000 crore convertible bond redemption in 2012.

The deal will provide Suzlon with much needed liquidity and the company said it would also use the cash to tap opportunities in India and growth markets like the United States, China, Brazil, South Africa, Turkey and Mexico.

Suzlon shares have risen 15 per cent in the past week on media reports of Shanghvi's interest in investing in the company in a personal capacity (See: Sun's Shanghvi reported in talks with Tanti for Suzlon stake).

The company last week denied having received a proposal from Shanghvi.

Suzlon sold its German unit Senvion SE, formerly REpower to buyout firm Centerbridge Partners last month for €1 billion in an all-cash deal, part of the company's plans to halve its rupee debt by 31 March (See: Suzlon in €1-bn pact with Centerbridge to sell subsidiary Senvion SE). 

Suzlon Energy is promoted by Tulsi Tanti.

After the allotment, DSA's shareholding will be 23 per cent (based on current shareholding), while the Tanti Family will hold 24 per cent shares.

Management control remains with the Tanti family by virtue of pooling arrangement for voting, the wind turbine maker said in a statement.

''This financial investment is in sync with the Prime Minister's long term vision and immense potential of the renewable energy market. While we believe Suzlon has the potential to emerge as a global leader in the renewable energy space from India, it will take substantial and sustained effort on part of the management team to achieve a significant operating performance improvement,'' Shanghvi said.

Sanghvi said he has strong faith in the leadership of chairman Tanti to achieve this and will continue as financial investors.

Sudhir Valia, part of DSA, said despite having strong fundamentals, during last couple of years Suzlon's performance was impacted by macro headwinds and liquidity constraints.

''We believe that our financial investment through equity infusion and facilitating working capital will enable the company to tap large opportunities in the renewable energy sector. We will be making an Open Offer as per regulatory requirement,'' Valia said.

DSA and Suzlon will form equal joint venture with for wind farm development business, the statement said. The joint venture will develop 450 MW wind farms within a stipulated period of time.

DSA will also assist in providing incremental project specific non-fund based working capital facility to Suzlon for execution of the wind farm project.

DSA will also provide credit enhancement to the lenders of Suzlon for additional project specific working capital facilities.

Tulsi Tanti, chairman of the Suzlon Group, said all the strategic initiatives are extremely crucial and will pave the way for growth.

''These bold steps will strengthen our capital structure permanently, enabling significant deleveraging and liquidity to ramp up volumes rapidly. We are convinced that the support from Dilipbhai Shanghvi and Family will help in creating a long term sustainable value for our stakeholders,'' Tanti said.

Tanti said Suzlon is poised to enter FY16 with a strong liquidity position to tap the opportunity available in India as well as key growth markets like USA, China, Brazil, South Africa, Turkey and Mexico.

Amit Agarwal chief financial officer of Suzlon Energy said these initiatives will result in sizeable debt reduction, savings on interest expense and will provide the necessary liquidity to boost operations.

Suzlon's Tanti said the company and DSA will invest Rs400 crore each for wind farm business.

Tanti did not comment on the proposed open offer and its implications.

''It's too early to comment on open offer. Current regulations mandate for an open offer. However, the management control will be with us,'' Tanti said.

Meanwhile, Dilip Shanghvi and others on Saturday made an open offer to shareholders of Suzlon Energy immediately after announcing that it would invest Rs1,800 crore in the company.