RInfra sells Mumbai power utility to Adani
The sale of Mumbai power assets to Adani Transmission will reduce Reliance Infrastructure’s debt by two-thirds to ₹ 7,500 crore
Mumbai: Reliance Infrastructure Ltd’s chairman Anil Ambani on Wednesday completed the sale of its Mumbai city power distribution business to fellow industrialist Gautam Adani for ₹18,800 crore.
Though Reliance Infra has sold one of its profitable business ventures, it will help bolster the company’s financials by repaying debt of ₹13,800 crore from an accumulated debt of ₹22,000 crore.
“For Reliance Infra, this is truly a transformative transaction. RInfra’s gross debt will be reduced from about ₹22,000 crore to ₹7,500 crore, representing a steep debt reduction of 65% in just a single transaction,” chairman Ambani told reporters at a news conference. “RInfra’s annual interest cost will also be reduced by 70% from ₹2,600 crore to ₹800 crore.”
The deal will help to narrow RInfra’s debt-equity ratio to 0.3:1, among the lowest in the industry.
To further pare debt, Ambani said he expects arbitration awards of ₹6,000 crore in ongoing cases of Delhi Metro Rail Corporation, Goa Power and National Highways Authority of India, and a ₹5,000 crore inflow from regulatory assets of the Mumbai Power distribution business that are under approval. “We have a further cushion of ₹8,000 crore under arbitration yet to be decided. With these available cash avenues, we expect to be completely debt-free by 2019.”
Ambani plans to make RInfra “capital-light with high return on capital employed”. Making a case for Reliance Infra, Ambani said his remaining businesses will continue to bring in stable revenues over long concession periods with no further need to sell assets. These include a city utility business in parts of Delhi which covers 4.2 million customers, 11 operational road projects with annual revenue of ₹1,300 crore, the Mumbai metro project and 5,800 megawatts (MW) of coal-based power generation capacity.
Adani, which will now be one of the utilities in Mumbai, will house the business under Adani Electricity Mumbai Ltd (AEML). It will serve 3 million customers in Mumbai. In a phone interview, Anil Sardana, managing director and CEO, Adani Transmission Ltd and chairman AEML, said the company has a 100-day plan to bring in ‘wow’ factors to Mumbai’s customers. “This means faster turnaround time in commercial aspects of the business, streamlining of the interface with customers, prompter service with more delegates on the ground and IoT (internet-of-things)-enabled improvements.” Sardana also said that over the long term, the capital expenditure dosage in the business will be substantial—underground cables right now are very old and bulk power needs to be made more competitive so that consumers will benefit. “The plan is to not raise tariffs for consumers,” Sardana said.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in 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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