JSW, Sterlite to defer IPO plans on choppy markets

Emerging power companies JSW Energy and Sterlite Energy are believed to have deferred their public offering plans following the market slump, according to sources.

Sajjan Jindal group firm JSW Energy is now planning to raise funds for capital expenditure through private placement of 5 per cent stake to a US-based private equity fund. Sterlite Energy, a Vedanta Group company, plans to raise $1.6 billion loan for its greenfield projects, said sources.

Since the year's beginning, the Bombay Stock Exchange's benchmark index, the Sensex, has declined by 32.66 per cent (6,665 points).

"JSW Energy has suspended the IPO plan for the time being. We will wait for market conditions to improve before coming out with the public offering and the subsequent listing. The company has already filed the draft red herring prospectus (DRHP), which will not be pursued," said a top executive.

JSW is expected to raise over $500 million through private placement of the equity. A slew of private equity firms have approached the company for a stake.

The company plans to announce the deal very soon. A senior Sterlite executive said that the company has not formally talked about its IPO plan.

"At present, we are fully funded for the equity portion of power projects. Only one project is under implementation as of now - a 2,400-mw project in Orissa," the executive said.

On January 16, Vedanta Group Chairman Anil Agarwal said, "We are planning a $1-billion IPO for Sterlite Energy in the next few months." Agarwal, however, said it was too early to set a date for the IPO.

"I can't really give you a date but it will be in a few months time. Bankers and advisers are working on it," he had said.

JSW Energy is setting up power projects with cumulative capacity of 4,000 mw at an investment of Rs 12,000 crore. Sterlite plans to add 10,000 mw, investing Rs 40,000 crore in the process. According to reports, Sterlite plans to raise $1.6 billion via a syndicated loan, which will part-fund Sterlite Energy's projects here.

Earlier in the year, large equity offerings of Wockhardt Hospitals and Emaar MGF struggled to garner the funds. The country's stock markets have been volatile for most part of the year with several global factors, such as the US credit crisis and the recession in developed countries, serving as dampeners, amid runaway inflation.

The government's efforts to pull inflation down have resulted in a high interest rate regime, hammering the expectations of investors.

In January this year, the Indian primary equity market chalked up new records. During the period, Anil Ambani-controlled Reliance Power raised more than $3 billion through the largest ever public offering in the country. But the stock failed to perform in the subsequently choppy market.

Power companies are now veering towards raising funds from other sources. Essar Power, which is owned by the Ruias, is still in discussions with US-based private equity firm General Atlantic to raise nearly $600 million.

The government's ambitious plan to add almost 80,000 mw power during the 11th Five Year Plan have prompted power generation companies to ready capital expenditure.