Suzlon Energy is planning to sell up to 49% in its operations and maintenance subsidiary, Suzlon Global Services, in an attempt to raise funds to pare debt.
Suzlon is believed to be looking for a valuation of Rs 8,000 crore for the services business.
The company aims to reduce its debt by 30-40% by the end of 2018-19 through asset sale and other strategic initiatives.
The immediate task at hand is to raise enough funds to meet an obligation of around Rs 1,200 crore on its foreign currency convertible bonds (FCCBs) that mature in July 2019.
Suzlon is talking to two investors and the deal should be done before March. The services business in India has an annuity like cash flow, with operating margin of around 45%, so there is interest among private equity investors.
Suzlon Energy had a net term debt of Rs 6,800 crore and another Rs 3,400 crore of working capital loans as on end-September. The fall in the rupee has put additional pressure on companies, like Suzlon, who have foreign currency debt maturing soon.
What adds to Suzlon’s woes is that its share prices have fallen below the FCCB conversion price, leaving it no option but redemption of the bonds. In the last six months alone, shares of Suzlon Energy have fallen 40% to Rs 5 as against a marginal rise of 0.6% in the benchmark index Sensex. On Friday, Suzlon Energy slipped 0.77% to close at Rs 5.16 on BSE.
As a back-up plan, in case the deal gets delayed, Suzlon Energy is also in advanced stage of securing a long-term cash flow-based ring fenced funding of Rs 5,000 crore against this business, the source said. Suzlon Energy declined to comment.
Reference- Economic Times