The private equity (PE) deal environment witnessed an improvement in 2015 as compared to the previous year. According to Grant Thornton India LLP, as of November 2015, there were about 23 PE buyout transactions in 2015 across industries as against 16 deals in 2014 and 21 deals in the preceding year.
While the majority of PE deals were recorded in the information technology segment, the power sector also witnessed some big-ticket investments. PE investors continued to show interest in the renewable energy sector and key deals were also witnessed in the conventional power and equipment segments. PE investors acquired major to minor stakes.
Indian Infrastructure presents a round-up of the PE deals in the power sector during the past year…
ReNew Power Ventures Private Limited raised $265 million in equity funding from new and existing investors, taking the total equity raised to $655 million as of October 2015. In the current round, the Abu Dhabi Investment Authority’s subsidiary was the lead investor with a commitment of $200 million for a minority stake in ReNew Power. The company’s existing investors, Goldman Sachs and the Global Environment Fund (GEF) committed $50 million $15 million respectively. With this round of funding, Goldman Sachs’ total investment in ReNew Power has increased to $370 million, making it the largest investor. Meanwhile, GEF’s exposure has increased to $35 million. ReNew Power plans to utilise these funds to expand its renewables portfolio, which currently comprises 700 MW of commissioned and 900 MW of under-construction assets in the wind and solar segments.
In October 2015, the Aditya Birla Group and the Abraaj Group, a leading PE investor in the emerging markets, forged a partnership to build solar power projects in India. While Abraaj will invest in the partnership through one of its thematic funds, the Aditya Birla Group will invest through Aditya Birla Nuvo Limited. The financial details of the transaction were not disclosed and its closure is subject to regulatory approvals.
In the same month, Singapore’s sovereign wealth fund, GIC, announced the acquisition of Greenko Group Plc’s majority interest in Greenko Mauritius for about £162.8 million. The Greenko Group has over 800 MW of operational renewable energy capacity in India, mainly across the hydro, wind and biomass segments.
Wind turbine manufacturer Suzlon completed 100 per cent stake sale of its erstwhile German subsidiary, Senvion SE, to PE firm Centerbridge Partners LP in April 2015. A binding agreement in this context was signed between the two companies in January 2015 for a total cash consideration of Euro 1 billion and a future potential earn of up to an additional Euro 50 million. The transaction was aimed at reducing Suzlon’s debt and enabled the company to raise about Rs 70 billion in cash. The deal is aligned with the company’s strategy to focus on its domestic market, and on high-growth markets like the US, as well as China, Brazil, South Africa, Turkey and Mexico.
In the same month, Avantha Holdings Limited (promoter of Crompton Greaves [CG]) signed a share purchase agreement with Advent International and Temasek Holdings for selling 34.37 per cent stake in CG’s consumer products business, Crompton Greaves Consumer Electricals Limited (CGCEL). The transaction values CGCEL at an enterprise value of Rs 66 billion ($1.07 billion). While Advent International is a global PE firm with a presence in India, Temasek is an investment company based in Singapore. Both firms will acquire stakes in CGCEL following the demerger of the consumer products business from CG and the listing of CGCEL on the stock exchanges. The transaction, which is subject to statutory approvals, is expected to be completed in the first quarter of 2016.
In January 2015, IDFC Limited’s PE arm, IDFC Alternatives, acquired a 15 per cent stake in DB Power’s 1,200 MW coal-based power project in Chhattisgarh for Rs 5 billion. IDFC Alternatives made the investment through its India Infrastructure Fund II. The deal was significant as PE firms’ interest in the coal-based power sector had decreased in the past two years due to issues pertaining to fuel unavailability, delays in clearances; lack of power procurement bids, etc. DB Power is a part of Diligent Power Private Limited (promoted by the Bhaskar Group), which had earlier raised Rs 14.5 billion from US-based PE investors Warburg Pincus, LLC and JPMorgan Chase and Company in separate tranches between 2011 and 2013.
Given a backdrop of positive macroeconomic indicators and a focus on sector reforms, especially in the coal and distribution segments, PE deals in the power sector are expected to gain traction.