Suzlon rights may be at 20% discount to mkt price

Earlier, the plan was that REpower stake that Suzlon was buying from Martifer, which is close to Rs 1,800 crore, will be done by way of debt. They have been scouting the markets for the past one month trying to get good rates. Suzlon has pretty much restructured most of its deal, which last year was at very attractive rates of close to 9%.

This time around they were not able to get good kind of rates and that’s exactly why they are looking at equity markets. As of now, they are going for rights. This will be used for funding the Martifer stake acquisition. They also have some capex left which is Hansen and REpower’ capex which analyst put to the tune of Rs 1,200-1,500 crore.

The debt-equity for Suzlon stands a little over 1.2%. By increasing equity as of now, they are able to adjust that. So, by the end of FY09, they will sit at a very comfortable debt-equity ratio of 1%.

Till the date of the board meeting there is no guessing about pricing. The stock has fallen over the past 2-3 months. It used to be trading around Rs 280 per share. The stock has fallen to around Rs 190 per share at present. So, the price has corrected substantially. In that sense, there will be a discount and given how most rights issues have been done, one gets a sense that there could be a 20% discount to the current market price.

If it is 20% discount, then we are looking at a 7% equity dilution on the current share capital that it has right now.