Suzlon Energy – Hansen Stake Sale – Relief for Now

The Hansen stake sale at GBp95/ share fetches suboptimal value even though it may have helped bypass the stalemate on strategic sale process. We highlight a sharp decline in Hansen’s share price since the announcement of a secondary placement by Suzlon.

The transaction implies that Suzlon did not see the strategic sale of Hansen materializing in the near future and strategic buyers were not interested at the expected price. A sharp decline in Hansen to GBp100 from GBp140 appears to reflect the market’s wariness at the lack of interest from strategic buyers at the expected price, hence the much lower valuation.

The value of the placing is about GBP224 mn (about Rs17 bn). This is about 14% of the current net debt of Suzlon’s wind business. We believe the Hansen sale would not provide any valuation upside as we were attributing a higher valuation to Hansen but this may help partially restore the balance sheet and customer confidence. Suzlon would eventually sell the remaining 26% stake as well.