Gautam Adani-led Adani Transmission has achieved financial closure for the purchase of Reliance Infrastructure’s power generation and distribution business in Mumbai.
Gautam Adani-led Adani Transmission has achieved financial closure for the purchase of Reliance Infrastructure’s power generation and distribution business in Mumbai. People close to the development told FE that the financial closure for Rs 13,250 crore was achieved through a consortium of banks led by State Bank of India (SBI). ICICI Bank, Yes Bank, and IndusInd Bank also participated in it. State Bank will contribute around Rs 3,000 crore. “The loan will have a tenure of 15-years and will attract an interest rate of 9.5%,” a source said.
When contacted an Adani Group spokesperson said, “We confirm that we have arranged finances for the deal.” Spokespersons of SBI and Yes Bank said they cannot comment on individual accounts. IndusInd Bank did not respond to mails. On December 30, 2017, Adani Transmission signed a definitive agreement to acquire Reliance Infrastructure’s power generation and distribution business in Mumbai in a deal valued at Rs 13,251 crore. The deal marks Adani Transmission’s foray into the power distributions business, and will also help Reliance Infrastructure to pare its outstanding debt of about Rs 15,000 crore.
Gautam Adani had then said: “We see the distribution sector as the next sunrise sector as India embarks on its mission to achieve 24×7 power for all. We see a massive growth opportunity and will look at both organic and inorganic opportunities to build a market-leading distribution company.”
A senior analyst with a Mumbai-based brokerage said the two regulated assets bought by Adani Transmission generally have a cash credit availability as there’s no dependence on fuel or power purchase agreements unlike the generation business. Besides, the margins are very high in this business as there are no raw material costs. There is also fixed return on equity of 15.5%.
Adani Transmission’s net worth rose to Rs 2,946 crore in FY17 from Rs 2,672 crore a year ago. Also, its cash and cash equivalents rose to Rs 498 crore from Rs 449 crore a year ago. The debt-to-equity ratio dropped marginally to 2.93 from 2.97 in FY16. Given the already leveraged book, raising funds for such a large buyout was seen by some sections in the market as a challenging task.