Mumbai: Blackstone Advisors India Pvt. Ltd, the Indian arm of the world’s largest private equity firm, may be close to finalizing a deal to invest around $100 million in Kolkata-based power producer Visa Power Ltd, according to two people familiar with the matter.
The two, neither of whom wanted to be identified, added that a deal could be closed by the end of the month.
A spokesperson for Blackstone declined comment and said in an email that “as a policy Blackstone does not comment on speculation”.
Manoj Kumar Digga, chief financial officer at Visa Group, confirmed that the company is in talks “with a few private equity players”, but declined to provide details because he said Visa has signed a non-disclosure agreement with prospective buyers.
“It (the deal) will be finalized within a month. The money will be invested in Visa Power but will be used for our 1,200MW power plant in Chhattisgarh,” Digga added.
Visa Power is part of the Rs5,000 crore Visa Group, with interests in steel, power, mining, commodities trading, shipping and logistics. The company signed an agreement with the Chhattisgarh government in 2007 to set up a 1,200MW coal-based plant in the state at a cost of Rs6,200 crore. The plant is to be commissioned in 2013 and has been allotted 99.12 million tonnes of coal from Fatehpur East coal block, according to information on Visa’s website.
The possible investment in a power-generating firm is in line with Balckstone’s India strategy.
In an interview to Mint in June, Akhil Gupta, chairman and managing director at Blackstone Advisors India, had said his firm would not hesitate to put $1-1.5 billion out of its $2-3 billion investment target for the next five years in the power sector.
“It is an important sector for us. We are very closely looking at it. From the pipeline and the quality of deals we are seeing, we could be a big investor in the power sector. We want to invest in the sectors that are important to the Indian economy because that’s where we can make good returns also,” Gupta had said.
Jaisheel Garg, senior research analyst at SMC Global Securities Ltd, said given the number of large power projects being developed, an investment in a small firm such as Visa Power may not give Blackstone the desired returns.
“The new entrants will find it difficult to get the same rates as larger projects,” Garg added, pointing out that power rates in the open market have fallen to Rs4 per unit currently from Rs7.5 last year.
India plans to add 1,00,000MW of power-generating capacity on top of the current installed capacity of 1,60,000MW by 2017 at a total cost of Rs5 trillion.
Gaurav Ojha, analyst at AK Stockmart Pvt. Ltd, said companies that get their plants off the ground quickly will have an edge.
“Fast execution and fuel linkages will be key for Visa Power. A lot of companies have seen delays and cost escalations because they have had to import coal,” he added.
One of the persons familiar with the matter said that JM Financial Ltd is advising Visa on the deal in the making.