Avaluation report prepared by Price Waterhouse (PW) on NuPower Renewables in December 2016 has come under the lens of government agencies. It is being assessed whether NuPower’s assets were overvalued when it raised equity funds from entities located in tax havens abroad.
This PW valuation report was used by DH Renewables (DHRL), a Mauritius-based fund, to convert its preference shares worth Rs 4 billion in the loss-making company in March 2017, and was used by NuPower to buy back its shares from DHRL a month later.
According NuPower, for 2016-2017, its total capital employed (equity plus debt) was Rs 8.59 billion and total wind-based power generation capacity was 180 Megawatt (Mw). According to this data, the enterprise value (EV) per Mw works out to about Rs 47.7 million, while the EV to Ebitda (earnings before interest, tax, depreciation and amortisation) would be around 6.03 times. NuPower’s total operating income was Rs 2.10 billion for 2016-2017 and its profit before interest, lease, depreciation and tax (PBILDT) was Rs 1.42 billion. While the PBILDT almost doubled from Rs 730 million in 2015-16, the net loss (after deferred tax) came down to Rs 60 million in 2016-17 from Rs 1 billion in 2015-2016.
Based on PW’s valuation, NuPower then announced a buyback of shares in February 2017 at Rs 1,161 per share. The buyback of 15 per cent of NuPower’s equity was to be funded from the company’s reserves and would offer an exit to DHRL. DHRL, a subsidiary of Cayman Island-based Accion Diversified Strategies Fund, was holding 55 per cent of NuPower when the buyback was announced, according to its filings with the corporate affairs ministry. It is not known whether the buyback was implemented.
Source: Care RatingsPW did not comment on its valuation, but a spokesperson from an external agency said the valuation was almost similar to peer transactions in the renewable sector during 2016. The official said, according to PW, NuPower’s EV per Mw was Rs 82.5 million, but did not share details on how the valuation was arrived at.
In June 2016, Tata Power had acquired Welspun’s renewable energy assets at an EV per Mw of Rs 87.7 million. Though Welspun had 1,200 Mw of operating assets and was profit-making at the time of its transaction with the Tatas.
NuPower is under the scrutiny of government agencies as it received equity investment from Accion Diversified. The I-T department has said NuPower’s balance sheet did not substantiate such a high premium and it could be a case of round-tripping of unaccounted income by NuPower.
An email sent to NuPower and its founder seeking their responses on the story remained unanswered till the time of going to press.
The Central Bureau of Investigation is also probing whether a Rs 640-million loan given by the Videocon group to NuPower was in quid pro quo for a Rs 32-billion loan given by the ICICI Bank. NuPower is owned by Deepak Kochhar, husband of ICICI Bank’s CEO and MD Chanda Kochhar. NuPower and Videocon have denied any quid pro quo. The ICICI Bank board has also denied any conflict of interest on part of its MD.
The I-T department is trying to find out the source of funds of DHRL, based in Mauritius, and its parent Accion Diversified.
Business Standard had reported earlier that between 2014 and 2016, DHRL had paid a premium of Rs 1,161 a share, as against a face value of Rs 10, to buy compulsory convertible cumulative preferential shares.
The I-T department said the practice of issuing shares to a subsidiary of Accion Diversified is irregular, suspicious and un-explainable. “If the creditworthiness of the Singapore-based entity is not proved, it could be a case of money laundering of unaccounted income, which shall have direct tax implications,” the I-T department has said.
While raising funds from Indian banks, NuPower had said its marquee equity investor — Accion Diversified — is a private equity fund with a corpus of $250 million and has almost 12 investments across the world.
A Videocon official had earlier said that the Rs 640-million loan to NuPower would be returned with interest in 2021 according to initial contract. But NuPower has said the loan would be converted into shares of the company.