Tata group, Adani, CESC may join the race to buy BSES companies

Clouding the valuation will be dues to generation firms and a possible CAG audit

The Tata group, the Adani group, and CESC are planning to join the race to buy the 51 per cent stake held by Reliance Infrastructure in BSES Rajdhani Power Ltd (BRPL) and BSES Yamuna Power Ltd (BYPL), say investment banking sources.
 

They will be joining others keen on acquiring the stake in BRPL, the largest power distribution company in New Delhi with over 2.56 million consumers and in BYPL which supplies electricity to around 1.7 million consumers across Central and East Delhi.

“All electricity distribution companies are studying the books currently and trying to weigh the assets and liabilities of both the power distribution companies,” said a banking source.
 

Tata Power already has a significant presence in the capital. It supplies electricity to residential, commercial and industrial users in North and West Delhi through North Delhi Power Ltd. Tata Power is also among the three power distribution companies in the Mumbai metropolitan region.

Sanjeev Goenka-owned CESC supplies electricity in Kolkata and in Greater Noida, a satellite city of the National Capital Region.
 

The Greater Noida operations  are housed under Noida Power Company. Reliance Infrastructure is under pressure to repay bank loans and has put the assets up for sale so that it can use the proceeds to reduce its debt. The total reported company debt is around Rs 14,300 crore at the end of March this year on a consolidated basis, with current liabilities of around Rs 31,000 crore.
 

Reliance Infrastructure owns 51 per cent each in both the power distribution companies. The rest is owned by the New Delhi government through Delhi Power Company. The firms were privatised in 2002. A BSES Rajdhani spokesperson declined to comment on the sale process. A Tata Power official said no such proposal was under consideration at this stage.

An Adani Group spokesperson said: “The company keeps evaluating growth in pursuit of generating long-term sustainable stakeholder value and the company doesn’t comment on specific market queries.” CESC officials were unavailable for comment.
 

Bankers said the high dues owed to power generation companies and the litigation over the Comptroller and Auditor General audit of BRPL and BYPL may impact the valuation.

The valuation, they added, will depend on the receivables of regulatory assets in the companies’ books. Both companies have challenged the Delhi Electricity Regulatory Commission’s disallowance in various courts.

The regulatory deferral account recognized in BSES Rajdhani’s book of account as on March 31, 2018 is Rs 8,470 crore whereas DERC has recognized only Rs 3,979 crore, said Care Ratings in a statement dated April 6.
 

The closing balance of Rs 8,430 crore as on March 31, 2019, was still higher than that envisaged during the last review, said CARE Ratings, adding that the revenue gap addition is expected to increase in the year ending fiscal 2020 due to increased power purchase costs. 

Similarly, the regulatory deferral account recognised in BSES Yamuna’s book of account as on March 31, 2018 was Rs 8,122 crore whereas DERC has recognised only Rs 2,677 crore, CARE Ratings said.
 

The closing balance of Rs 8,074 crore as on March 31, 2019, although reduced from the previous year’s level, was still higher than that expected during the last review.
 

The cumulative regulatory dues of both the companies are nearly equivalent to their annual revenues in FY20. Both BRPL and BYPL together reported revenues of Rs 17,336 crore and profit before interest and taxes (PBIT) of Rs 2879 crore in FY20 according to exchange filings by Reliance Infrastructure.