Avantha in talks to sell Jhabua power project

Tata Power, ICICI Venture Fund JV in race to buy asset at a valuation of Rs 4,300 crore

The debt-hit Avantha group is in advanced talks to sell its Jhabua power project in Seoni, Madhya Pradesh, to a joint venture led by ICICI Venture Fund Management and Tata Power.

The valuation of the project would be around Rs 4,300 crore, including debt, a source in Avantha said. The group had sold its other power project in Korba, Chhattisgarh, to the Adani group in November 2014 for Rs 4,200 crore as part of a deleveraging plan.

“We have an offer from the joint venture fund and are in the process of taking a call soon,” a top executive of Avantha confirmed.  The Jhabua plant is owned by the unlisted Avantha Power and Infrastructure.  

A Tata Power spokesperson said the company did not comment on speculation.  The fund is being set up by Tata Power and ICICI Venture Fund to acquire distressed assets in India.

If the deal goes through, it will be a lifeline for the Avantha group, which is taking steps to bring down its debt to manageable levels. The group’s debt is Rs 9,500 crore and the Jhabua unit has debt of Rs 3,000 crore on its books.  

The Jhabua power project has 1,200 mw of thermal capacity under implementation in two phases of 600 Mw each. Of this, a 600 mw unit of the project was commissioned in May this year.  

Initial talks for the acquisition began almost a year ago and a decision is expected soon. An earlier plan by Avantha group company BILT to sell its Malaysian unit, Sabah, to a local company for $500 million collapsed, leading to renewed efforts to deleverage the group.

Avantha is not alone in selling its power projects to reduce debt. Hyderabad-based Lanco had sold its power project in Udupi to the Adani group for Rs 6,000 crore in August 2014. The Jaypee group sold hydro power projects to JSW Energy for Rs 9,700 crore in September last year.

Last month, Tata Power agreed to take over Welspun’s renewable energy assets for Rs 10,000 crore, making it one of the largest acquisitions in the solar power industry in India (see chart).

With the slowdown in the economy, many Indian groups are taking steps to reduce their debt on pressure from lenders.