In India's power transmission sector, the seller is emerging king

A number of EPC firms invested in the transmission segment and such assets may come up for sale

In the country’s power transmission sector, the seller is emerging king. With a huge buyer interest from transmission companies and yield-based investment firms, industry experts say it may be a good time to sell transmission assets.

Last week, infrastructure investment trust (InvIT) IndiGrid signed agreements with Techno Electric & Engineering Company to buy  a stake worth Rs 2.32 billion in Patran Transmission Company.

Pratik Agarwal, chief executive officer, IndiGrid, said he is on the lookout for more such assets.

“We have a full-fledged deals' team. There are several players looking to sell assets. Assets worth Rs 100 billion to Rs 200 billion could become available owing to the nature of ownership,” Agarwal said.

IndiGrid is not a lone buyer in the transmission sector where only a few assets are up for sale. “Yield-based investment firms are highly interested in such assets because these promise stable returns," said an investment banker. He said the Canada Pension Plan Investment Board (CPPIB) and IDFC Alternatives were some of the firms interested to pick a stake in power transmission assets. IDFC and CPPIB, in an email response, declined to comment.

Power deals

384,898 circuit KM

Transmission lines as of Jan 2018

Recent Deals

Nov ‘17: Adani Transmission completed acquisition of Western Region Strengthening System assets from Reliance Infrastructure Limited (R-Infra)

Feb ‘18: IndiGrid to invest in Patran Transmission Company

Source: Central Electricity Auhtority, Company 

""Private assets available in this segment are quite few. For buyers, it will be difficult to find assets. It is definitely a seller’s market; they will lead the entire game,” said Ashish Nainan, an analyst with Care Ratings. “With the government targeting at rural electrification, players in engineering, procurement and construction (EPC) will look for more capital to take up such orders. It will be wise for EPC players to monetise transmission projects and invest.”

A number of smaller EPC companies have invested in the transmission segment due to a dearth of EPC projects. According to industry experts, these companies may now see a reason to exit from such assets and pursue new orders.

“Through the build –own–operate–maintain (BOOM) route, close to 60 projects were awarded to EPC companies. For these companies, power transmission is a non-core area,” Agarwal said. He said InvIT would keep an eye on these assets.

There are private companies which hold transmission assets in joint ventures with Power Grid Corporation of India and a few others that built transmission assets as the last mile for their own power projects.

Industry experts see the possibility of such assets coming up for sale.  However, some expect regulatory trouble with such assets.

“Approvals for joint ventures are difficult. Besides, some of these companies are in the National Company Law Tribunal (NCLT) and there is a small scope for the sale of individual assets,” said another investment banker.