Sembcorp Industries to raise $380 million from asset sales, plans India energy IPO

SINGAPORE (Reuters) - Singapore's Sembcorp Industries said on Friday it expects to raise about $380 million from the sale of some utilities assets and plans to list its Indian energy business, as it reported a plunge in quarterly profit.

The industrial conglomerate, which has been conducting a strategic review of its businesses, said it had begun the process for an initial public offering (IPO) of the Indian unit, Sembcorp Energy India Ltd.

It expected the divestments of peripheral utilities assets to provide cash proceeds of up to S$500 million ($380 million) over the next two years, not including the potential proceeds from the proposed India listing on BSE Ltd and the National Stock Exchange of India.

"I think they are making the right move. They will definitely be able to unlock cash from their divestment of assets and the IPO," said Joel Ng, an analyst with KGI Securities.

A draft prospectus showed the IPO comprises of a fresh issue of shares worth up to 40.95 billion rupees ($631 million) by Sembcorp Energy India, and up to 146.8 million shares will be offered for sale by existing shareholders.

The company, the biggest shareholder in rig-builder Sembcorp Marine, reported a net profit of S$22.8 million for the fourth quarter, a drop of 85 percent from the same period a year ago.

Shares of Sembcorp Marine fell as much as 6.9 percent on Friday, extending Thursday's 11 percent slump - their biggest two-day percentage fall in a decade. The company had turned in poorer-than-expected results earlier this week.

Sembcorp Industries' review, which began last year, had prompted market talk of a potential privatisation or divestment of Sembcorp Marine, according to analysts.

The market was likely disappointed that its parent's review did not include any action related to Sembcorp Marine, KGI's Ng said.

Neil McGregor, Sembcorp Industries' CEO, said the company was confident that Sembcorp Marine was well-positioned to benefit from offshore and marine industry's recovery, said.

"We will continue to support the business through the cycle," he said.

The company said its utilities business will now focus on four key markets, Singapore and Southeast Asia, China, India and the UK.

Sembcorp Industries, which set a target of doubling its renewables portfolio to about 4,000 megawatts by 2022, also said it had entered into a conditional agreement to divest its municipal water operations in South Africa.

Its CEO said the company hopes to increase its return on equity to double-digit levels in five years, from 3.2 percent currently.

Singapore state investor Temasek is the biggest shareholder in Sembcorp Industries.

Axis Capital, Credit Suisse, CLSA and SBI Capital Markets are the global coordinators for the India IPO. The four firms and IndusInd Bank are the book running lead managers for the issue.

($1 = 1.3186 Singapore dollars)

($1 = 64.8700 Indian rupees)

(Reporting by Aradhana Aravindan; Additional reporting by John Geddie; Editing by Shri Navaratnam and Gopakumar Warrier)