DB Power buys out investor GIP's stake, pays back Rs 500 cr loan

Power generation unit of Dainik Bhaskar Group was to be bought by Adani Power; deal called off

DB Power, the power generation unit of the Dainik Bhaskar Group that was to be bought over by Adani Power till last month, is now learnt to have taken over the stake of one of its investors.

Sources said DB Power had bought the share of private equity investor Global Infrastructure Partners (GIP) for Rs 400 crore in a deal funded completely through internal cash flows. It has also repaid a loan worth Rs 500 crore, sources said.

The company has improved its operations and profitability on the back of enhanced power demand and merchant power sale, they told 'Business Standard'.

DB Power has a 1200-megawatt (mw) coal-fired power project called Diligent Power in Chhattisgarh since 2015. The plant has coal supply within the state. Apart from state-owned lenders led by State Bank of India, the plant has GIP (erstwhile IDFC Alternatives), JP Morgan and Warbug Pincus as private equity investors.

Adani Power, in 2022, signed a memorandum of understanding (MoU), with DB Power to acquire its power unit. DB Power was valued at Rs 7,000 crore. However, last month the conglomerate decided to call off the deal saying “the long stop date under the memorandum of understanding has expired’’. The decision to call off the deal came after Adani Enterprises in February withdrew a follow-on public offering (FPO) after US short seller Hindenburg Research alleged financial misconduct at the company. The FPO proceeds were aimed at new investments in the Adani company.

Key takeaways

• DB Energy has a 1,200-megawatt power plant in Chhattisgarh — Diliigent Power 
• Power unit has been operating since 2015
• In 2022, Adani Power signed MoU with DB Power to purchase the unit for Rs 7,000 cr
• Adani called off the deal in February this year 
• Unit has a long-term PPA with Chhattisgarh (360 Mw). It signed medium-term PPA with Tamil Nadu, Rajasthan, and Gujarat last year

DB Power, however, has seen its operations and cash flows improve. According to executives, till January, DB Power had made an operating profit of Rs 1400 crore.

“Uptick in power demand with early summers and economic rebound coupled with enhanced merchant sales has improved the revenue. Along with what DB sells through its power purchase agreements, there has been a healthy growth in sale on power exchanges at competitive rates,” said an executive requesting anonymity.

Sources said the unit has repaid close to Rs 550 crore as principal amount and an additional Rs 350 crore interest amount. With the valuation provided by Adani, and with power demand rising, the company’s promoters are now looking to revive DB Power and maintain healthy cash flows, sources said.

DB Power was tagged as a stressed asset in the initial list of stranded power projects by the Department of Financial Services in 2018. It was removed from the list after the company contested it. Company sources said the unit has never seen any loan restructuring from any of its lenders and is far from being a stressed asset.