IS SUZLON ENERGY A GOOD BUY ?

Hansen Transmissions is a leading global player in manufacturing wind gear boxes.

Suzlon, based in the western city of Ahmedabad and controlled by billionaire Tulsi Tanti, announced in June it would sell all or part of its holding in Hansen to reduce debt.

Suzlon currently holds 92% of REpower but under German law must buy out the remaining shareholders in order to exercise full control and integrate the two companies. At the current value of REpower’s shares, 8% of the company would cost approximately $150 million, Mr. Sinha said, though a German court must approve the price Suzlon pays to the shareholders. A REpower spokeswoman declined comment.

Suzlon, which is based in the city of Pune and was founded by Indian entrepreneur Tulsi Tanti, was once a high-flying wind firm with aspirations to combine India’s cheap manufacturing with technological know-how to establish a global wind-turbine powerhouse. Its ambitions have been blown off course in the past couple of years, however, because of the financial crisis that buffeted the industry, manufacturing problems with Suzlon turbines and a high level of debt

Suzlon Energy, India’s biggest maker of wind turbine generators, has sold a 35-percent stake recently in Belgian wind gearbox maker Hansen, raising 370 million dollars as it moves to cut debt.

Suzlon Energy Ltd. aims to push for the completion of its purchase of Germany’sREpower Systems AG in the next few months after it finalizes new bank financing, a move that would allow the Indian wind turbine manufacturer to broaden its range of products and streamline its suppliers, according to Sumant Sinha, Suzlon’s chief operating officer.

In an interview, Mr. Sinha said the company would file for a so-called “domination agreement” in Germany “probably in a couple of months.”

Mr. Sinha said the company has spent about $100 million to retrofit blades that cracked on turbines in the U.S. and is making progress on putting its financial affairs in order.

Suzlon as a Speculative stock

Of the company’s total debt, about $250 million is debt owed to the Tanti family that will be converted into equity, he said. A further $500 million is in the form of convertible bonds. About $800 million is in loans from international banks and was used to fund the purchases of REpower and a stake in Hansen Transmissions International N.V., a Belgian turbine gearbox maker. The remaining $1 billion is in rupee-denominated loans from Indian banks.The recent sale of some of its Hansen stake brought Suzlon $370 million and a new $465 million loan from the State Bank of India will allow Suzlon to pay off the acquisition loan from the international banks in the next few days, Mr. Sinha said.

The remaining rupee debt is being refinanced with a consortium of Indian banks on terms that require no principal repayments for two years and no covenants for two years. Covenants are terms in a loan that require the borrower to meet specific financial metrics or face repayment demands. He said the interest rate on this new financing wasn’t yet fixed but would likely be around 10% annually.

That’s doubly good for companies like Suzlon. There are plenty of wind farms being built every year, and Chinese developers don’t require the biggest, newest machines. Friday, Suzlon landed two additional orders in China—for its older, less technologically-advanced machines. “Suzlon is poised to be a key player in this rapidly growing market,” the company said in a press release.

Now, the big challenge for Suzlon is to fend off the established turbine makers who also have their sights set on China. Vestas of Denmark, the global leader, said last week it saw China as its path to bolstering falling global market share.

In other news

As many as 47 Indian companies, led by corporate behemoth Reliance Industries and the country’s biggest lender, State Bank of India, have made it to the list of world’s biggest 2,000 companies by US magazine Forbes. However, five Indian companies — scam-hit IT firm Satyam Computer, realty firm Unitech, Suzlon Energy and two Anil Ambani group firms

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