IFC picks up $125-million equity stake in Hero Group's renewable energy arm

Hero Future Energies is the renewable energy arm of the Hero Group

IFC, together with IFC Global Infrastructure Fund, a private equity fund managed by IFC Asset Management Company, will invest $125 million in equity, enabling the company to set up 1 GW of greenfield solar and wind plants in the next 12 months across India. 

"Our endeavour is to achieve the new goal of 2.7 GW renewable energy capacity by 2020,” said Rahul Munjal, Chairman & Managing Director, Hero Future Energies. Currently, Hero Future Energies has a presence in 12 states in India with a capacity of over 360 megawatt having solar, wind, and rooftop installations.
 

Sunil Jain, Chief Executive Officer, Hero Future Energies added this partnership will help the company to tap opportunities in both domestic and overseas markets as well as new technologies namely storage, hybrid projects among others.

 "With this partnership with Hero Future Energies, IFC is helping accelerate the transition of the renewable energy generation business to mainstream power sector. Through the Global Infrastructure Fund, IFC is also bringing in the support of international institutional investors," said Mengistu Alemayehu, Regional Director, IFC South Asia. "Such a development will boost the confidence of other large business groups and international investors to contribute to India's ambitious renewable energy targets and make a significant difference in ramping up renewable-energy capacity in the country."

IFC portfolio companies have set up over 3 GW of different forms of renewable-power projects in the country on Thursday. IFC’s advisory team is helping the state of Madhya Pradesh set up a 750-MW solar power project in Rewa, which will be the largest single-site solar plant in the world when completed. 

India is IFC's top country exposure, globally. IFC's committed portfolio in India is over $5 billion as of June 30, 2016. In FY16, IFC committed $1.1 billion in new investments in the country. In addition to strengthening local capital markets in India, IFC is focused on boosting financing in infrastructure and logistics, promoting financial inclusion, helping create conditions to attract increased private capital, and helping structure public-private partnerships.

EY was the exclusive transaction advisor for this fund-raise.

"It is a win-win deal for both as HFE is one of India’s best renewable portfolios and IFC is a premier international investor. The renewable energy sector has closed the year on a high note with this deal," Kuljit Singh, partner - Transaction Advisory Services (Infrastructure), EY said. 

"This shows the continued confidence that the international investors and Indian developers have in the huge growth plans of the government for this sector. The Hero-IFC transaction creates a new benchmark in the sector given the nature and size of this minority equity investment," he added.