Reliance Infrastructure will use the proceeds from the sale of its Mumbai power assets to repay debt, and post the deal, it will turn debt-free
Mumbai: Reliance Infrastructure Ltd (RInfra) on Thursday said it has signed a definitive binding agreement to sell its Mumbai power business to Adani Transmission Ltd for Rs18,800 crore.
While initially the company will be paid Rs13,251 crore, about Rs5,000 crore will come into the company’s books after the successful resolution of certain regulatory issues, most likely in 2018-19, Reliance Infrastructure CEO Lalit Jalan told Mint.
He added that the deal is likely to close by March 2018.
The deal will see the Adani Group taking over the distribution of over 1,800 megawatt (MW) of power to roughly 30 lakh customers in Mumbai and 500MW of thermal power generation capacity.
In a statement, Adani Group chairman Gautam Adani said, “We see a massive growth opportunity and will look at both organic and inorganic opportunities to build a market leading distribution company. With this acquisition, Adani Transmission will enjoy benefit of scale and of being an integrated distribution and transmission in India."
Reliance Infrastructure said the entire proceeds from the sale will be utilized to repay debt, and post the deal, it will turn debt-free. As of September, the company owed lenders well over Rs10,000 crore. “This monetization is a major step in RInfra’s deleveraging strategy for future growth," the company said in a statement.
The hiving off of the Mumbai power business, however, doesn’t mean the end of the road for RInfra’s power distribution dreams. “We have our Delhi distribution business, which is twice the size of Mumbai distribution," Jalan said.
The focus of the company, however, is now clearly on its engineering, procurement and construction (EPC) and defence portfolios. “Our main focus area for growth will be EPC and defence. Today, our EPC order book, including the ones where we have been declared L1, is in excess of Rs10,000 crore and in 2-3 years will build up to Rs50,000 crore," Jalan said. In the quarter ended September, EPC accounted for just 11% of Reliance Infrastructure’s revenue.
The deal between RInfra and Adani Transmission is not the first between the two groups. Back in October, the former had sold its Western Region System Strengthening Scheme (WRSSS) business to the latter for Rs1,000 crore.
Reliance Infrastructure’s Mumbai power business is the country’s largest private sector integrated power utility, distributing power to nearly 3 million residential and commercial consumers in Mumbai and its suburbs covering an area of 400 sq.km. At peak demand, it caters over 1,800 MW of power.
The deal will help Adani Transmission add about 540 circuit kilometres to its existing network, which stood at 5,448 circuit kilometres, as of 31 March 2017. The company has a stated objective of owning 20,000 circuit kilometres of transmission lines under it by 2022. “To take the growth ahead, the company is constructing 2,369 circuit kilometres in Rajasthan, Chhattisgarh, Madhya Pradesh, Maharashtra, Jharkhand and Bihar, which were awarded through a tariff based competitive bidding process," Gautam Adani had stated in the company’s last annual report.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.
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