ATL’s offer of around Rs 13,000 crore is above RInfra’s market cap of Rs 12,325.03 crore
Adani Transmission Limited (ATL) will purchase Anil Ambani led Reliance Infrastructure's (RInfra's) Mumbai power business – Reliance Energy for around Rs 13,000 crore, according to sources.
This marks ATL's foray in power distribution business and RInfra losing out on its crown jewel.
ATL's offer of around Rs 13,000 crore is above RInfra's market capitalisation of Rs 12,325.03 crore.
"The deal valuation is less than what Greenko had offered a few months ago," said a source in the know of the deal told DNA Money. The Hyderabad-headquartered Greenko had made an offer of somewhere in the range of Rs 13,000 to Rs 14,000 crore, which lapsed in September.
Last month RInfra and ATL had signed "period of exclusivity" agreement, which is valid till January 2018, to discuss the deal. RInfra's Mumbai energy business includes integrated power generation, transmission and distribution.
As the deal is moving ahead, ATL will strengthen its footprint in power transmission sector apart from making an entry into power distribution business.
At the moment, due diligence to transfer the business to ATL is almost through and "documentation" stage is underway. An official announcement about Reliance Energy's sale is on the cards for later this month.
As part of the transaction, even the debt of its Mumbai's power business will be transferred to ATL. However, it was not clear if all the real estate under the power arm of RInfra would be transferred to the Adani Group. If all the properties are part of the larger deal, than RInfra will lose out on its prime office space at Santacruz, next to the airport, from where its senior management operates.
Responding to email questionnaire RInfra maintained that "there is no further development on the matter" apart from both the companies signing 'period of exclusivity' contract. ATL did not respond to DNA Money's query.
In fiscal 2017-e nd, RInfra's consolidated debt stood at Rs 29,165 crore. Once the deal is through, the transaction will help RInfra to reduce it by about Rs 10,000 crore.
A month ago, RInfra-ATL had signed a Business Transfer Agreement for Western Region System Strengthening Scheme (WRSSS) Transmission Undertakings. With ATL buying WRSSS for Rs 1,000 crore, the proceeds will help in further reducing company's debt.
The Anil Ambani-promoted company is also in the process of selling 74% stake in Parbati Koldam Transmission Company Ltd to ATL for another Rs 1,000 crore.
This isn't the first attempt by RInfra to divest its Mumbai power business. Before Greenko's offer, in November 2015, RInfra had entered into an agreement to sell 49% stake to Canadian Public Sector Pension Investment Board, but the deal did not materialise.
Cash-strapped RInfra has already sold its cement business to Birla Corporation for Rs 4,800 crore and has plans to sell its seven (out of 11) road projects to the Infrastructure Investment Trust for Rs 2,500 crore. Gradually, its other businesses in transport and road division may either be listed or divested.
Once all these capex-heavy businesses are sold, the company wants to focus on defence business.
In 2002, RInfra had bought Mumbai power business from Bombay Suburban Electric Supply. In 2008, Reliance Energy was renamed as RInfra.
SEALING DEAL
- ATL’s offer of around Rs 13,000 crore is above RInfra’s market cap of Rs 12,325.03 crore
- The debt of its Mumbai’s power business will be transferred to ATL
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