R-Infra may list power distribution, transmission and Metro subsidiaries

Anil Ambani-controlled Reliance Infrastructure (R-Infra) is considering offering shares of its newly created subsidiaries to the public and looking to bring in strategic financial partners as part of value unlocking.

Of the six subsidiaries formed as part of a demerger scheme, yet to be approved by the Bombay High Court, the company plans to list at least the power distribution companies, Reliance Energy and Reliance Power Transmission, in addition to its Metro projects, said two company sources.

A top company executive said: “We are not in a hurry, but will list a few entities when it grows to substantial size. The estimation is that distribution, transmission and metro businesses will become mature for listing in one-two years, with the execution of existing and forthcoming orders.”

About roping in strategic partners, other company sources said various investors have shown interest in the subsidiaries but the decision will be taken only when going to the public. “The public offerings would be on similar lines to the Reliance Power IPO,” they added.

R-Power, an electricity generation company, was hived off from R-Infra, formerly known as Reliance Energy, and listed on Indian bourses after the country’s largest initial public offering (IPO) of Rs 11,000 crore in early 2008. Though the company has Rs 18,000 crore worth shares (45 per cent stake) in Reliance Power, the market capitalisation of R-Infra stood at Rs 27,160 crore at Thursday’s share price.

“R-Infra stock is undervalued from the perspective of its asset size, order flow and financial health. If the subsidiaries were to be listed separately, the combined stock value would have been in excess of Rs 3,000, as against the current share price of around Rs 1,200,” said a company source.

With six subsidiaries and an engineering, procurement and construction (EPC) order book of Rs 46,000 crore, including in-house orders worth Rs 25, 000 crore, the company aims to become an operating-cum-holding company.

“Since the company has nearly Rs 9,000 crore cash and cash equivalent on the books, it could raise a further debt of around Rs 28,000 crore. So, altogether, we have a liquidity of Rs 37,000 crore. Thus, fund raising is not the primary objective of public offering. We would like to leverage the value of businesses, in turn to evolve R-Infra as a conglomerate,” said the executive.

The demerger scheme also aims to spin off Dahanu thermal power station, Goa and Samalkot power stations, toll roads and real estate businesses into separate entities. The EPC division will remain under R-Infra. The three metro projects are currently special purpose vehicles (SPVs) under R-Infra.