Massive interest in Indian wind shares -- Suzlon's IPO

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Indian wind turbine manufacturer Suzlon Energy introduced its initial public offering (IPO) of shares on the Bombay Stock Exchange and India's National Stock Exchange at 09.00 on September 23. By 09.03 the share capital on offer was oversubscribed 16 times.

The strong demand demonstrates that shares were sold for the maximum price within the pre-set price band of INR 425-510 per share, bringing the total value of the company to between $3.4 and $3.5 billion, says Suzlon managing director Per Hornung Pedersen, roughly the same as competitor Vestas, the world's largest wind turbine company.

Suzlon's book-building period ran for six days to September 29. The shares will be traded on the stock exchange in Mombay from about October 25. Prior to the book-building, Suzlon was presented to potential investors in roadshows in the United States, Great Britain, Hong Kong and Singapore alongside presentations in India.

Hornung Pedersen, from Suzlon's Danish headquarters and responsible for the company's international activities, also in connection with Suzlon's flotation, says interest in the IPO has been enormous, both among the general public and institutional investors.

Sale of the 10.2% of Suzlon's shares on offer will bring in $350 million, says Hornung Pedersen. Of this, $120 million will be used on new factories in the US, China and India as well as establishment of a headquarters and training centre in India. The US factory, which will produce blades, will most probably be located in Pipestone, Minnesota. The Chinese factory is going up near Beijing on land already acquired by Suzlon.

The remaining $230 million brought in by the IPO will be used to finance Suzlon's international expansion. "We expect to continue our strong growth," says Hornung Pedersen. He regrets, though, that like the rest of the turbine manufacturing industry, Suzlon order books are full for the next couple of years.

Delivery bottleneck

"In principle I have to say 2008 if you ask when we can deliver a wind turbine that's ordered today," he says. "Our bottleneck is mainly because our suppliers of gearboxes and main shafts cannot keep up. Our gearbox supplier's defence is that it has problems with deliveries of bearings." Suzlon gearboxes are supplied by Winergy, a division of the German Flender group, owned by Siemens.

Aside from the 10.2% of Suzlon's shares in the IPO, another 20% are owned by institutional investors, who may first sell them in a year's time. The almost 70% remaining shares in the ten year old company remain in the hands of the Indian family that founded Suzlon, headed by Girish Tanti. The Danish headquarters were set up a year ago by Hornung Pedersen, formerly financial director at NEG Micon (Windpower Monthly, October 2005).

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