Hyderabad: Nava Bharat Ventures Ltd, India’s second largest ferro-alloy manufacturer with interests in power and sugar, and its partners are in talks with institutional investors to divest a minority stake in an ambitious 250-acre special economic zone project that they are setting up for Rs1,000 crore.
The company is in talks with three Indian and overseas firms. “We are inducting a financial investor and are in talks,” G.R.K. Prasad, chief financial officer, Nava Bharat said, declining to name suitors citing confidentiality clauses in his company’s discussions with them.
The SEZ—belonging to a new-class industrial parks that are eligible for waivers on costs such as excise and import duties—is to be set up through a joint venture company Brahmani Infratech near the upcoming Hyderabad international airport. It will focus on clients in tech and back-office services industry. Nava Bharat holds 51% in Brahmani Infratech with other partners including Hyderabad-based Malaxmi Group holding the remaining 49%. The partners plan to raise around Rs150 crore by selling 30% of the total holding in the venture.
In an unrelated development, Nava Bharat has decided not to go ahead with a proposed integrated sugar project following adverse conditions of Indian sugar industry. The Rs723-crore company had earlier planned to set up a sugar project capable of crushing 3,500 tonnes of sugar cane a day, a distillery of 40kl capacity per day and a co-generation facility of 25 mega watt (MW). The Rs150-crore project was to come up at Shanti Ashram near Nava Bharat’s sugar plant in East Godavari district of Andhra Pradesh.
“We have decided to shelve the integrated sugar project for the time being and may consider reviving the plans in the coming years when the sugar industry’s prospects appear bright,” said Prasad.
After three years of continuous demand-supply deficits, the country’s sugar industry is in a glut with a record 22.7 million tonnes (mt) production last year. Sugar prices have fallen by a fifth in the last six months. With a similar rise in global production owing to bumper output in Brazil, India and Thailand, global sugar prices have come down to $350 (Rs14,350) a tonne from a 10-year high of $480 per tonne last May.
Hence, Nava Bharat, which saw a 80% contribution of profit from its power business in the last fiscal year, has decided to concentrate on power generation. In addition to the medium-term plan to augment power-generation capacity from 121MW to 237MW at an investment of Rs360 crore, it has also decided upgradethe capacity of a powerproject coming up in Orissa in association with the Malaxmi Group.
The Orissa project will be enhanced to 1050MW from 600MW planned earlier, Prasad said. Nava Bharat plans to hold majority stake in the Orissa project, coming up at an investment of Rs4,600 crore, as against 26% holding envisaged earlier. The company also plans to enter the power trading business.
Nava Bharat had raised Rs233.52 crore through foreign currency convertible bonds last year for proposed expansions in sugar and power divisions. “We (now) plan to invest Rs700 crore in Orissa power project,” Prasad said.
To meet the funds requirement, the company is also considering a proposal to award a 68-acre real-estate property at Nacharam, on the outskirts of Hyderabad, to a developer through which around Rs350 crore could be raised, Prasad said. The power business could ease the volatility risk associated with ferro-alloys, said Rajashekar Iyer, chief investment officer with the private equity firm M3 Investments. The power generation business “can keep profits stable while retaining the upside when ferro-alloys prices are very strong,” Iyer said.