The domestic power industry may see a pick-up in merger and acquisition (M&A) activity this year as the majority of private power producers remain highly indebted and look to sell assets even as recent policy reforms fuel foreign investors’ interest in the sector, says India Ratings, a credit ratings agency.
The agency further says that investor interest in the sector should be fuelled by policy decisions taken by the central government recently to address issues affecting power companies, including fuel shortages and indebtedness of state-owned power distribution companies.
Significantly, the balance sheets of a majority of power firms, including GMR, GVK, Lanco Power and Jaypee Group, remain stretched due to high debt and these players have been looking for buyers to sell assets. Foreign invest-ors have shown interest, but deals remain elusive. “The depreciating rupee and de-leveraging plans of independent power producers with stretched balance sheets have fuelled investor interest n the sector, which may witness asset buyouts by strategic investors,” India Ratings said in ‘2014 Outlook: Power Sector’ released on Thursday.