Debt-ridden power producers Jindal Power and Reliance Infrastructure are selling their stake in India Energy Exchange (IEX) to raise capital for servicing debt.
Last week, ratings agency CRISIL had downgraded certain debt instruments of Jindal Steel and Power (JSPL), parent of Jindal Power, to default, citing delays in payment of interest on term loans. Following this, the JSPL management announced plans to sell stake in certain units of its steel business, set up joint ventures with companies in Asia and Europe, and seek a buyer for its power assets in India to pare debt.
Read more from our special coverage on "JINDAL POWER"
Jindal Power holds a 4.12 per cent stake in IEX, which it is now selling.
"The stake is getting sold at a valuation of about Rs 2,500 crore for the exchange," said an investment banker familiar with the transaction. Details about the buyers were not available at the time of going to press.
Late last year, Jignesh Shah-promoted Financial Technologies sold its residual stake of five per cent in IEX at a valuation of Rs 2,100 crore. The listed entity was forced to sell its stake in the energy exchange following a May 2014 order by the Central Electricity Regulatory Commission. That saw the firm sell its entire 25.6 per cent stake in IEX in multiple tranches. "As part of the monetisation plan already advised, Jindal Power has entered into a definitive agreement to divest 4.12 per cent holding in IEX at an undisclosed amount and is expected to realise the consideration within the current financial year," the company said in response to Business Standard's query.
JSPL has reported losses for five quarters in a row as it has been hurt by a steep fall in steel realisations due to cheap imports from China, Japan, South Korea and Russia. JSPL had a consolidated debt of Rs 42,534 crore as of September 2015. Since 2014, JSPL has evaluated options, including selling mines in Africa and Australia, and listing its power business in India to reduce debt. None of these potential sales came about.
The plan to list its power unit Jindal Power has been put on hold. It now plans to sell the 3,400-Mw power capacity in part or full. Of this, about 2,800 Mw is ready and the remaining is under construction. The company has power purchase agreements for about 1,200 Mw of capacity, leaving half the capacity idle. Overall, the company wants to cut down debt to Rs 25,000 crore.
Similarly, Anil Ambani-promoted Reliance Infrastructure is in negotiations with potential buyers for selling its five per cent holding in IEX. The group has been selling assets across companies in an attempt to cut debt even as it expands its focus on the defence sector.
In November 2015, Reliance Infrastructure had agreed to sell 49 per cent stake in its electricity generation, transmission and distribution business in Mumbai and adjoining areas to Canadian pension fund Public Sector Pension Investment Board (PSP Investments). Last month, the company also agreed to sell its cement assets to Birla Corp for Rs 4,800 crore.
Reliance Infrastructure has also spoken about selling its entire portfolio of road projects, which would be valued at Rs 9,000 crore according to investment banking sources. The company plans to bring down debt in Reliance Infrastructure to zero by March 2017 from about Rs 16,000 crore at present.
Reliance Infrastructure declined to comment on its plan to sell stake in IEX. "Once the valuation benchmark is set through Jindal Power's stake sale in IEX, Reliance Infra will closely follow," said a banker familiar with the development.