RPower sought shareholders’ approval for raising funds through QIP…

Anil Ambani Group firm Reliance Power has sought the approval of shareholders to raise funds through sale of up to 25 per cent shares to institutional investors for funding projects.

It has also sought the nod for mopping up funds through issuing of securities in international markets, according to the company's annual report for 2010-11.

When contacted, a Reliance Group spokesperson said, "These are merely enabling resolutions that will remain valid till the next AGM, but there are no plans for making any QIP or other offering of securities at this time". Meanwhile, the proposed issue of QIP securities may be made in one or more tranches.

"... the aggregate amount raised by the issue shall not result in the increase of the issued and subscribed equity share capital of the company on the relevant date by more than 25 per cent of the then issued and subscribed equity shares of the company as on the relevant date," the report noted.

 
The proposed sale of securities in international markets would also have a ceiling of 25 per cent of then issued and subscribed equity shares.

Based on today's market capitalisation of Rs 23,422 crore, around 25 per cent stake in the company would be worth over Rs 5,850 crore.

Reliance Power on its own and through its subsidiaries has a planned portfolio of over 35,000 MW generation capacity, including both operational as well as projects under development.

"In order to part finance such a large portfolio of power projects and to enhance its global competitiveness and ability to compete with the peer groups in the domestic and international markets, the company needs to strengthen its financial position and net worth by augmenting its long-term resources," the report said.

In letter to shareholders, Reliance Power Chairman Anil Ambani said the company expects to commission 600-MW Rosa Phase-II project, the 600 MW Butibori project at Nagpur, Maharashtra and one unit of 3,960 MW Sasan Ultra Mega Power Project (UMPP) at Madhya Pradesh, by 2012.

"Besides, we shall commission the open cycle phase of India's largest gas based power project, the 2,400 MW project at Samalkot, in the current financial year and the combined cycle phase by the next year," Ambani wrote.

Reliance Power recorded a profit of Rs 760.44 crore in 2010-11.

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Spark’s Update on Suzlon Energy…

Suzlon Energy is turning out to be one interesting turnaround story. After a couple of loss-making years, it appears to be gearing up its businesses, as reflected by its financial performance in 2011 so far. In the March '11 quarter, Suzlon improvised upon its operating margins by more than 500 basis points y-o-y. The June '11 quarter also saw the company post impressive double-digit operating margins.

 
Suzlon registered more than 80% y-o-y growth in revenues in June '11 quarter while its net profit was impressive at 60 crore against a loss of over 900 crore in the June '10 quarter. The raw material cost, as a percentage to sales, also declined by nearly 1000 basis points to 64% in June '11, indicating the cost efficiencies being put in place. It has also succeeded in keeping its wage costs in check, helping it considerably improve its operating margins.

 
Suzlon has maintained its guidance of achieving 24,000-26,000 of sales in FY12, backed by its order book of over 29,000 crore.

Its acquisition of

REpower has played a major role in the turnaround.

Nearly 62% of its current order book is from REpower. Suzlon is now in the final stages of acquiring the remaining 5% stake REpower from minority shareholders for approximately 398 crore.

Even as a turnaround in visible, Suzlon's stock currently trades around 34-36 on the bourses, i.e. its near 52-week low level. Over the past one-year, this counter has returned a negative 27% against the Sensex's negative 12%.

 
Apart from its weak financials in the past, a major concern that is holding back investors is Suzlon's huge

debt which includes the foreign currency convertible bonds loan due for repayment next fiscal.

The management, however, is optimistic about meeting its loan obligation, intending to fund it through operating cash flows, receipts from the stake sale in Hansen Transmissions and also the expected recovery from one of its large US-based debtor by the second half of this fiscal. It has a cash balance of over 3,000 crore as at the end of March '11 while its total debt stood at over 12,500 crore

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