Suzlon Energy shares in focus over merger of wholly-owned subsidiary with itself

Suzlon Energy board has given its nod for the merger of its wholly-owned subsidiary, Suzlon Global Services, with the parent company.

Also in firm's pipeline is plan to transfer its project business on a slump sale basis to one or more wholly-owned subsidiaries of the company.

A capital reorganisation exercise is also proposed via Scheme of Arrangement by reclassification and transfer of general reserve to retained earnings of the company and also merge Suzlon Energy, Mauritius, another wholly-owned subsidiary, with itself.

There will be no change in the existing shareholding pattern post this rejig, the firm said in a statement. The tentative timeline for completion of the merger is 6-10 months, subject to approvals, the firm said in an exchange filing.

Suzlon Global Services manages operation and maintenance of the wind turbine generators along other businesses. Since it is a wholly owned subsidiary of Suzlon Energy, no shares shall be allotted.

Highlighting the need for restructuring, Suzlon Energy said that the amalgamation would result in simplified group structure to further improve transparency. Suzlon Energy also said that the merger would strengthen its stand-alone balance sheet, which is an important criteria for PSU (public sector unit) bids.

“Two divisions of the same entity provide WTG (wind turbine generator) sale and O&M (operations and maintenance) services, resulting in improved customer comfort,” the company added. Shares of Suzlon Energy are down 91% from their record high in a period of 16 years. The renewable energy stock hit a record high of Rs 459.80 in January 2008. The multibagger stock was trading at Rs 41.50 in the current session, losing 90.97% from its all-time high on BSE. However, Suzlon Energy stock has delivered multibagger returns in a period of one year and beyond. Suzlon Energy shares have climbed 411% in the last one year and risen 782% in the last three years. In the last five years, the Suzlon Energy stock has gained 570.11%.

Kushal Gandhi, Technical Analyst, Stoxbox said, "Suzlon Energy recently underwent a modest profit booking correction of 30% following a 628% surge in the price action. This indicates strength in the primary trend. The price action is now consolidating and whipsawing around 20 weeks' exponential moving average, acting as an immediate support zone. Suzlon displays strong price strength and higher buyer demand; the sectoral theme also shows strength and momentum. Suzlon's price action offers low risk and a higher reward from the current market price for the target of Rs 49.50 against a stop loss of Rs 38.50."