Suzlon Energy Ltd. (SUEL) fell to a record low after its founders sold a stake raising 1 billion rupees ($19.6 million) to reinvest in the wind-turbine maker as India’s falling rupee raises the cost of paying bondholders.
The shares declined as much as 7.4 percent to 23.75 rupees, the lowest price since its trading debut in October 2005, before recovering to 24.4 rupees as of 9:43 a.m. in Mumbai trading. The benchmark BSE India Sensitive Index, or Sensex, was down 1.1 percent
Samanvaya Holdings Pvt. cut its stake to 1.86 percent from 3.94 percent, and the money raised will be provided to Suzlon for its operations, according to a filing to the Bombay Stock Exchange yesterday. Samanvaya is part of the holding company owned by the family of Suzlon Chairman and Founder Tulsi Tanti, it said.
India’s rupee has weakened this year, driving up the cost of repaying $389 million in foreign currency convertible bonds. Principle repayments start next year on 100 billion rupees of loans Suzlon refinanced in 2010. Suzlon must pay more in rupees for the debts as the Indian currency weakens.
“The more it depreciates, the more Suzlon will have to pay,” said Bhargav Buddhadev, analyst at Ambit Capital Pvt., by phone from Mumbai, who estimates the company owes bondholders about $500 million including the premium it may have to pay.
The notes are apt to miss the threshold at which investors would convert them into equity because of a 50 percent slide in the shares in the past six months.
The rupee fell against the dollar to a more than two-year low of 50.9550 this week after depreciating 53 percent since the beginning of August. Suzlon is based in Pune, India.
The founders may have sold the stake to raise funds because banks won’t lend any more to Suzlon, Buddhadev said. “It’s already refinanced once, and they’re skeptical about any further exposure to the company,” he said.
Suzlon Chief Financial Officer Robin Banerjee said in an Oct. 24 interview that the company can pay bondholders if necessary from its share premium account, which holds 52 billion rupees.
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