Srei firm in talks to buy Abhijeet Group’s project in Jharkhand

Project valued at around Rs.9,000 crore, could be the first of several acquisitions in India’s power sector

New Delhi: India Power Corp. Ltd, a group firm of Kolkata-based non-banking finance company Srei Infrastructure Finance Ltd, plans to acquire Abhijeet Group’s 1,080 megawatt (MW) Jharkhand power project, valued at around Rs.9,000 crore, in what could be the first of several acquisitions in India’s power sector.

Lenders to the Abhijeet project, including state-owned Rural Electrification Corp. Ltd (REC) and State Bank of India (SBI), have been looking to recover or restructure their loans. The Abhijeet group, promoted by Manoj Jayaswal, is one of the alleged beneficiaries of the previous government’s irregular allotment of coal mines. The Central Bureau of Investigation (CBI) is probing the allotments.

Jayaswal has been in talks with Srei Infrastructure, which has approached lenders with a buyout plan, said a person familiar with the development who asked not be identified.

“We have given our Expression of Interest to the Bankers of Abhijeet Group for its power assets in Jharkhand as well as exploring other generating assets for takeover,” Jyoti Poddar , an independent director at India Power, said by email.

A Srei spokesperson didn’t respond to emailed queries sent on Tuesday seeking comment. A Srei executive, who spoke on condition of anonymity, confirmed the development.

An Abhijeet Group spokesperson also confirmed the development.

“Abhijeet Group had decided to bring in a “strategic partner” to help complete various projects which have been affected due to the financial constraints of banks owing to ongoing investigations by CBI,” the spokesperson said in an emailed response.

“For our 1,080MW Thermal Power Project at Chandwa, Latehar Distt, Jharkhand M/s Srei Infrastructure Finance Ltd is one of the groups with whom discussions are going on.”

The Jharkhand project has four units of 270MW each, divided into two phases. While REC is the lead lender for two units, SBI is the lead lender for the remaining two.

SBI has lent around Rs.2,200 crore to the group, but has Rs.3,200 crore of collateral pledged with it. REC has sanctioned around Rs.2,000 crore for the project and has released Rs.650 crore.

An REC executive who also didn’t wish to be identified confirmed the development. “Abhijeet Group wants to exit the project,” this executive said.

An SBI spokesperson did not respond to an e-mail seeking comment sent on Friday.

Slowing growth, high borrowing costs and delays in securing regulatory approvals have hit many infrastructure projects in India including power plants, hurting the ability of their promoters to repay creditors and vendors.

Corporate Power has also been hit by investigations into Abhijeet Group in the coal mine allotment case.

Abhijeet Infrastructure has been named in the Comptroller and Auditor General of India’s list of companies to which coal mines were irregularly allotted. CBI had charged Jas Infrastructure and Power Ltd, also part of Abhijeet Group, in cases related to the allocations.

The investigative agency later filed a closure report.

The Jharkhand project has been stuck on account of non-payment of dues owed to government-run power equipment maker Bharat Heavy Electricals Ltd. According to Abhijeet Group, the expected date of commissioning of Phase I is December 2014 and Phase II August 2015.

Srei Infrastructure finances commercial and construction equipment, infrastructure projects and also advises companies on projects. According to information available on Srei’s website, the group incorporated India Power Corporation Ltd and acquired DPSC Ltd, a distribution licensee in the Asansol-Raniganj belt, in 2010. These firms were later merged and named India Power.

Investor interest in the power business has waned over the past few years but analysts expect it to revive under the Narendra Modi-led National Democratic Alliance government that took charge on 27 May after results of the election were declared on 16 May.

Referring to the new government, Credit Suisse India Research said in a 19 May report: “This provides us great comfort on ability of the new government to implement long awaited critical reforms (in coal, railways, defence etc). This should result in a kick start of a structural upturn in the investment cycle (though meaningful increase in earnings should be visible only in FY17), justifying multiple rerating for Industrials.”

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