Suzlon struggles to assure sceptics

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Embattled Indian wind turbine manufacturer Suzlon has paid Portuguese Martifer Group EUR 30 million ($41.4 million) for another chunk of its stake in German wind turbine manufacturer Repower, coming through on a promise Suzlon hopes will reassure sceptics about its financial stability. Suzlon's founders and majority shareholders, the Tanti family, has also sold 6% of its shares to raise money for a further stake in Repower and to meet other financial obligations, reducing its ownership in Suzlon to about 60%.

Suzlon vowed to pay the EUR 30 million second instalment for Repower and a EUR 175 million ($241.5 million) final sum after failing to honour an agreement to pay Martifer for the full 22.4% stake in December at an agreed price EUR 270 million ($372.6 million). Instead, Suzlon paid Martifer a first instalment of EUR 65 million ($89.7 million) for a 5% stake in Repower, raising its ownership to 73.1%. After the second instalment, Suzlon now owns 76%. Suzlon was scheduled to pay Martifer the remaining EUR 175 million last month, increasing its stake in Repower to about 91%.

The Tanti family late last month sold 4% of its stake in Suzlon and was to lend the proceeds, worth about $120 million, to Suzlon to help pay the final instalment. The shares were sold for 3% below market price to Prudential Asia, the DKR Oasis Investment Group and other buyers, reports the company. It declines to provide a breakdown. No decision has been made on when the family loan to Suzlon must be repaid or what the terms are. "Suffice to say that it will have better terms than any other lender," says a company spokesperson.

Suzlon is to raise the remaining sum for the acquisition partly through debt and from revenue from sales. Though the company has not escaped fallout from the global economic crisis, it says its margins are healthy.

Days earlier last month, Tanti family members raised $47 million through a sale of 30 million shares in Suzlon, or about 2% of their entire stake, to pay for turbines supplied and installed by Suzlon at wind projects owned by its founders, as well as to pay back loans for buying the turbines. Suzlon says the stake was bought by institutional investors, without adding details.

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