Mumbai: Renewable energy producer Mytrah Energy (India) Ltd is considering raising $100-200 million by selling shares through an initial public offering (IPO) or to private equity investors, managing director Vikram Kailas said.
Separately, the company plans to provide an exit opportunity to existing investor IDFC Ltd, which owns a stake that is valued at about $100 million, Kailas said.
“We are looking to replace IDFC by March 2017 and we are also looking for some growth capital. Now, that can happen through several means; either it could be a private equity offering or it could be an IPO or it could be something else. We don’t know which mode we will take, but we are definitely in early stages of evaluating how to raise around $200-300 million," he said.
Investors Apollo Global Management Llc, Merrill Lynch International (a unit of Bank of America Merrill Lynch) and IDFC together hold about 25% in the Indian unit, while founder Ravi Kailas and family own the rest. The parent company, Mytrah Energy Ltd, is listed on the Alternative Investment Market of the London Stock Exchange.
IDFC’s infrastructure fund, under asset management unit IDFC Alternatives, had in 2011 invested ₹ 350 crore in Mytrah through a structured finance transaction that will need an exit before March 2017, while Apollo Global and Merrill Lynch International are going to hold their investment in the renewable energy firm till 2020, Kailas said.
Kailas estimates India will add between 5,000 megawatts (MW) to 10,000MW of combined capacity in wind and solar energy every year. “We aspire to do 5-15% of that capacity addition a year."
The company, one of the largest in the sector, operates about 920MW of wind energy capacity and recently won projects for about 500MW of solar energy capacity. In April, the Asian Development Bank approved a loan facility of up to $175 million to help fund Mytrah’s portfolio of new wind and solar projects.
A number of renewable energy producers are also looking for investors and partners to complete their pipeline of committed projects. India has added solar capacity at the fastest rate so far in 2016 and is expected to become the fourth largest solar market this year, overtaking the UK, Germany and France, said a report released in April by consulting firm Bridge to India.
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India currently has about 8 gigawatts (GW) of installed solar energy capacity and over 27GW of wind energy capacity. It has a target of setting up 100GW of solar and 60GW of wind energy capacity by 2022.
India is adding wind installations of about 4-5GW every year, said Anubhav Gupta, an analyst with Maybank Kim Eng Securities India. “This new capacity will come from new capital. Existing developers have to raise growth capital for at least the next three to four years to fund this expansion," Gupta said.
Favourable investor sentiment has made renewable energy the perfect asset class for initial public offerings (IPOs), said Kailas. “I think the market seems to be extremely attractive (for IPO). You’re seeing oversubscriptions, interest levels are going up quite a bit... and it’s a very steady business once you build a plant. It’s a business where you have a lot of visibility of cash flows. But we will have to wait and watch, we are still evaluating," he said.
Larger rival ReNew Power Ventures Pvt. Ltd, backed by Goldman Sachs Group Inc., has started the process for an IPO and has put out a request for proposal to appoint investment bankers, Mint reported in May.
Merger and acquisition (M&A) activity in the renewable energy sector, especially in the solar sector, has been rising with the entry of global clean energy firms and financial investors, including pension funds and sovereign wealth funds. In 2015, there were 14 M&A deals in the renewable energy sector, including hydropower projects, worth $2.27 billion, according to data from Venture Intelligence, a research service focused on private company financials, transactions and valuations.
In June, Tata Power Co. Ltd said it would buy clean energy firm Welspun Renewables Energy in a $1.38 billion deal, the largest transaction in the country’s renewables sector.