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Sterlite may sell $2 bn stake in energy unit to build power plants

Sterlite may sell $2 bn stake in energy unit to build power plants
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First Published: Fri, Nov 30 2007. 01 42 AM IST

Expansion plans: Anil Agarwal, chairman of Sterlite Industries parent Vedanta Resources
Expansion plans: Anil Agarwal, chairman of Sterlite Industries parent Vedanta Resources
Updated: Fri, Nov 30 2007. 01 42 AM IST
Tuticorin: India’s biggest copper producer, Sterlite Industries (India) Ltd (SIIL), an arm of Vedanta Resources Plc., plans to sell a stake worth as much as $2 billion (about Rs7,940 crore) in its energy unit to build power plants, three people familiar with the matter said. The group may sell 15% of Mumbai-based Sterlite Energy Ltd to investors, they said, asking not to be identified because the talks are private. The sale may raise between $1.5 billion and $2 billion, they said.
The Union government is doubling investments in power because electrical shortages cause blackouts in most of India and slow down economic growth. The spending plan is wooing investors to shares of Sterlite, controlled by billionaire Anil Agarwal’s Vedanta Resources, and Reliance Energy Ltd.
Expansion plans: Anil Agarwal, chairman of Sterlite Industries parent Vedanta Resources
“These days big investments are being made to raise the nation’s power generation capacity since it is imperative the nation add large quantities of power,” said Jayesh Shroff, who holds Sterlite Industries shares among the $6 billion he helps manage at SBI Funds Management Pvt. Ltd in Mumbai. “The power sector is the happening sector in India.”
Reliance Energy’s stock has more than tripled this year and is the best performing stock on the benchmark Sensex, and the group’s Reliance Power Ltd unit plans to sell shares for the first time. Sterlite Industries has gained 64% on the Bombay Stock Exchange (BSE), valuing the company at $15.8 billion.
In June, Sterlite Industries raised $1.75 billion to invest in power—driving a record year for stock sales by Indian companies.
On 7 November, the group said Sterlite Energy may sell shares or debt to expand its electricity generating capacity to 10,000MW. Most of the projects would be completed in five years, the conglomerate said in a statement to BSE.
The group may consider an initial public offering of Sterlite Energy next year after the stake sale, the people familiar with the development said.
Dhanpal Jhaveri, a Vedanta spokesperson, declined comment. Vedanta, India’s largest producer of copper and zinc, controls 68% of Sterlite Industries. In June, Sterlite Industries sold shares in the US to fund a 2,400MW power plant in Orissa, where the group is building a 500,000-tonne aluminium smelter to meet rising global demand for metals.
India, which generates 128,182MW of electricity, plans to set up eight large power projects, each with a generation capacity of more than 4,000MW.
Power Grid Corp. of India Ltd, the country’s main power transmission company, sold shares this year to fund a more than doubling of India’s network to 77,690 miles—long enough to circle the earth three times. Its stock has risen 72% since the initial sale.
The Union government plans to spend Rs6.17 trillion by 2012 to boost generation and upgrade transmission and distribution networks—up from Rs2.89 trillion in the past five years.
The finance ministry estimates a power shortage is responsible for cutting gross domestic production by one-tenth. Share sales by Indian firms almost doubled this year to Rs66,200 crore, as a rally in the nation’s stock market and accelerating economic growth drew in investors.
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First Published: Fri, Nov 30 2007. 01 42 AM IST