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Bhaskar Group's power generation company, Diliigent Power, is in advanced talks to sell an equity stake in the company for $150 million (around Rs 800 crore) to JP Morgan, three persons with knowledge of the development said.
This would be the first private equity deal in the conventional energy space since 2011 as investors have shied away from the beleaguered sector due to policy uncertainties, fuel scarcity, and weak health of utilities. Companies like GMR, GVK, Lanco, among others, are in talks with prospective private equity investors for stake sale. But no major deals have fructified. In fact, according to reports, private equity company Blackstone Advisors India has called off its $111-million (around Rs 600 crore) deal with Kolkata-based Visa Power Ltd which was announced in 2011, on concerns over the Indian power sector. Diliigent Power and JP Morgan declined to comment on the development. One of the sources said that JP Morgan may own 21% stake in Diliigent after the completion of the deal. "They are fine tuning the deal and would seal it and make the final announcement soon," one of the sources said.
In February, ET had reported that Diliigent was in talks with PE players like Actis, Khazanah, JP Morgan, Carlyle and IDFC to raise money and fund development of its four power plants in the country aimed at producing around 6,400 megawatts. "Investors are jittery of power sector since there are a lot of uncertainties and policy initiatives have not yet translated into success.
Any deals that take place would be driven on the merit of the project and fuel linkage would be the biggest attraction for investors," said Sanjeev Zarbade, vice president- private client group research, Kotak Securities. Diliigent had appointed investment banking firm Avendus to advise it on the deal. Avendus had also advised the company in 2011 when it raised around $150 million from PE fund Warburg Pincus.
Diliigent Power, an independent power producer, is currently setting up two power plants in the country -- a 1,200 MW coal-based thermal power plant in Chhattisgarh and a 1,320 MW thermal power plant in Madhya Pradesh. The Chhattisgarh project is close to completion and is likely to start commercial operations later this year, while the Madhya Pradesh unit is under construction. Shortage of fossil fuel, delay in project execution, units running at low capacity and the poor health of state electricity boards have retarded growth of the power sector.
Highly leveraged power companies, which are struggling to manage huge debt amid muted cash flows, are seeking equity investment but investors with deep pockets continue to be cautious about investing in the sector.
Blackstone, which had announced plans to invest in Visa Power in 2011, decided to call off the deal after the company failed to meet milestones despite the investor pumping in about $20 million into the company. Prior to that, the last significant deals in the sector happened in 2010, when GMR and GVK Power and Infrastructure raised funds through the private equity route. GMR raised around Rs 1,470 crore in its power venture from Singapore-based Temasek Holdings and IDFC Private Equity, while GVK raised Rs 1,498 crore the same year from three private equity investors, 3i India Infrastructure Fund, Actis and GIC.
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