Suzlon's RePower deal not EPS accretive
The deal looks fundamentally sound for Suzlon Energy. But it is going to be negative for the stock.
By Mohammed Sabir, INDIATIMES NEWS NETWORK |
MUMBAI: Acquisition of Germany based RePower saw the Suzlon Energy sizzle on the stock market and close up 19 per cent on the Bombay Stock Exchange and 20 per cent on National Stock Exchange.
Analysts believe the deal looks fundamentally sound for the business of Suzlon Energy, but it is going to be earnings per share dilutive and thus negative for the stock.
"The deal is not going to be EPS accretive for Suzlon Energy till FY09 (2008-09) as the valuation of the deal is on the higher side," said an analyst from a leading brokerage.
Suzlon will fund the deal via debt and has already raised $300 million through FCCBs, which will lead to equity dilution.
From a long term view, the deal looks good for Suzlon as it gives the company an entry into the European market.
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Suzlon had bid 126 euros per share for RePower in February, outbidding Areva's bid of 105 euros. In the subsequent weeks, Suzlon increased its bid to 150 euros to counter Areva's 140 euros. The stock was beaten down then as the market felt the bid was high. Start a SIP with as low as ₹500 with ET Money App!
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