Suzlon - BUY (Target Rs80, Upside 25.1%)

CMP Rs64, Target Rs80, Upside 25.1%

Suzlonannounced the reduction in conversion price of its US$211mn and US$121mnFCCB’s to Rs97.26/share from Rs359.68/share and Rs371.55/sharerespectively. It also revised the floor price to Rs74/share for both thesebonds. In addition it has agreed to pay ~US$6mn as incentive fee to thebondholders and has asked for the removal of financial covenants and waiver ofany existing or prior breaches. Post conversion of these bonds, Suzlon’sequity will dilute by 9.8%. However, it will enable the company to improve itsbalance sheet as it could potentially reduce debt by ~Rs15bn. The stock hascorrected by ~11% in the last one month, thus making the stock attractivelyvalued. Upgrade to BUY with a target price of Rs80/share.