The 49% stake is being sold to PSP Investments. Photo: Indranil Bhoumik/Mint
Mumbai: Reliance Infrastructure Ltd, a part of Anil Ambani’s Reliance Group, said on Monday it intends to sell a 49% stake in its electricity generation, transmission and distribution business in Mumbai and adjoining areas to Canadian pension fund Public Sector Pension Investment Board (PSP Investments).
Financial details of the transaction were not disclosed, but a person close to the development said the deal was valued at about Rs.3,500 crore.The deal is expected to be completed by March 2016, said the person on condition of anonymity.
The announcement comes less than two weeks after Reliance Infrastructure said it would sell its cement and roads interests to reduce debt and focus on its newer defence business, which it entered with purchase of an 18% stake in ship maker Pipavav Defence and Offshore Engineering Co Ltd.
Reliance Infrastructure said it will utilize money from the stake sale in the power distribution business to reduce debt. The company had a debt of Rs.24,645 crore, as of 30 September.
PSP Investments is a large pension fund manager in Canada that managed C$112.0 billion (about Rs.5.53 trillion) worth of assets as of 31 March.
“The parties have entered into an exclusivity agreement valid till 31 March 2016. The proposed transaction is subject to due diligence, definitive documentation, applicable regulatory and other approvals and certain other conditions,” the Indian firm said in a statement to the BSE. “Accordingly, there can be no certainty that a transaction will result.”
Reliance Infrastructure will carve out the power distribution business, called Reliance Energy, into a separate special purpose vehicle (SPV) and own the remaining 51% stake, the company said. Reliance Energy has an enterprise value of about Rs.15,000 crore and debt of about Rs.8,000 crore,which will be transferred to the new SPV, said the person cited above.
Earlier this month, Reliance Infrastructure said it will sell its cement and roads business to expand in its defence business. It has shortlisted seven out of 15 potential buyers, who have shown interest in its cement business, the company said on 4 November. It has also started a process to monetize its portfolio of 11 road projects, which has received early interest from strategic and portfolio institutional investors in India and overseas.
Two of Canada’s largest pension funds—Caisse de dépôt et placement du Québec (CDPQ) and PSP Investments —are looking to invest in the Indian infrastructure sector and have started scouting for assets, Mint had reported in October, citing two people familiar with the discussions.
Reliance Energy distributes power to nearly three million consumers, covering an area of 400 sq.km, and catering to a peak demand of over 1,800 megawatt, with revenue of Rs.7,700 crore in 2014-15.
Separately on Monday, Reliance Infrastructure said it had received approvals from Competition Commission of India (CCI) and the Gujarat Maritime Board (GMB) for its open offer to buy up to a 26% stake in Pipavav Defence.
“The mandatory open offer to acquire up to 26% shares from the public shareholders of the company, at a price of Rs.66 per share, in terms of applicable Sebi (Securities and Exchange Board of India) Takeover Regulations shall open on 2 December 2015 and shall close 15 December 2015,” Reliance Infrastructure said in a filing on Monday.
As part of the previously announced acquisition, Reliance Infrastructure will acquire 30 million equity shares from the promoters of Pipavav Defence, representing about 18% stake at a price of Rs.63 per share for a total of Rs.819 crore.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.