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Suzlon Jumps Most Since May on Billionaire Shanghvi Lifeline

According to reports, Suzlon Energy Ltd. surged the most since May after Indian billionaire Dilip Shanghvi and his family agreed to buy a 23 percent stake, throwing a lifeline to the indebted company that defaulted in 2012.

The Pune-based company, Asia’s second-largest maker of wind turbines, will get 18 billion rupees ($289 million) from the sale, part of which it will use to develop new technologies, it said in a statement over the weekend. Its shares surged 20 percent to 23 rupees in Mumbai, their biggest gain since May 19.

“It brings back a lot of confidence into the stock,” said Paras Bothra, an analyst at Ashika Stock Broking Ltd. in Mumbai. “Shanghvi has a very strong track record of making the right investment. The sector is also seeing a huge thrust by the government.”

 The investment by Shanghvi, India’s second-richest man with a net worth of about $20 billion, comes less than a month after Suzlon agreed to sell its German unit Senvion SE for 1 billion euros ($1.1 billion) in cash to New York-based Centerbridge Partners LP. Suzlon defaulted on $209 million of dollar-denominated convertible bonds two and a half years ago.

“We’ve been struggling for the past two years,” Chairman Tulsi Tanti said in a phone interview on Saturday. “Our first step was to exit Senvion and with this transaction, the company will be able to accelerate growth.”

Suzlon is converting $140 million of convertible bonds into equity. After the conversion and the sale of Senvion, its debt will fall from about 165 billion rupees to 75 billion. This includes 40 billion rupees of foreign currency bonds and 35 billion of working capital loan, according to Tanti.

The Tanti family will retain management control of Suzlon, holding 24 percent of shares. They held 31 percent as of Feb. 5, a stock exchange filing showed. This will decrease to 17.5 percent after the investment by the Shanghvi family and the conversion of convertible bonds into equity, compared with Shanghvi’s 16.7 percent, according to a company presentation on its website.

Dilip Shanghvi Family and Associates will provide security for any shortfall in funding from banks over the next two years, according to Tanti.

It also offered to buy an additional 1.58 billion shares, or 26 percent of Suzlon, from shareholders at 18 rupees a share, a Mumbai stock exchange filing showed. That’s 11 percent higher than the average 16.24 rupees for the stock this year.

Suzlon shares have rallied 56 percent this year in Mumbai, beating a 6 percent increase in the benchmark S&P BSE Sensex.

The company on Saturday reported quarterly earnings before interest, taxes, depreciation and amortization of 2.95 billion rupees, compared with a loss of 1.37 billion a year earlier. Sales for the third quarter of its 2015 fiscal year were little changed at 49.5 billion rupees.

Tanti told analysts on Nov. 3 that he’s “very serious” about reducing liabilities and freeing up more capital for projects. Suzlon, whose debt surged 30 percent to 173 billion rupees in the three years to September, is seeking to emerge from a debt-revamp program by the end of March.

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