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The stock of wind turbine maker Suzlon Energy rose nearly 20 per cent on Monday in response to Dilip Sanghvi, promoter of Sun Pharmaceuticals, investing in the company and the subsequent open offer that the investment triggers.
Control of debt-laden Suzlon Energy lies with Tulsi Tanti and the promoter family, who now own 30.94 per cent of the company. In an exchange filing, Suzlon said the board had decided to issue up to 100 crore equity shares on preferential basis to Dilip Shanghvi Family and Associates, a post-acquisition stake of nearly 23 per cent for ₹1,800 crore, which will reduce the Tanti family holding to 24 per cent.
According to rules laid down by the Securities and Exchange Board of India in 2011, this triggers an open offer by the two largest shareholders. Sanghvi and Tanti — now described as “persons acting in concert” — will jointly make an open offer for 157.64 crore equity shares at ₹18 apiece, bringing the offer size to ₹2,837 crore. The open offer represents 26 per cent of the ‘emerging voting capital’ of Suzlon, which is the post-offer voting capital, including convertible bonds.
As details of the offer were revealed on Monday, Suzlon’s stock responded by moving up 19.84 per cent on the BSE to close at ₹22.95, breaching its upper circuit, and recording a volume spurt of 3.19 times. On the NSE, the stock rose 19.79 per cent to end the session at ₹23.
Welcome cash infusionFor the December quarter, the company reported a consolidated net loss of ₹6,538 crore compared with losses of ₹1,075.25 crore in Q3FY14. The company has been plagued by an excess of debt on its balance sheet, the low point being in 2012 when it defaulted on $209 million of convertible bonds. The investment by Dilip Sanghvi is seen as a welcome cash infusion into the company.
Gaurav Dua, Head of Research, Sharekhan, said, “Suzlon is a company in a sunrise sector that has been facing a lot of balance sheet issues. So, this infusion of funds, especially by a reputable investor joining the board, augurs well for the company.”
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