JSW Energy Limited share price jumped more than 5 percent on Tuesday after the company announced the take over 100% stake in GMR Kamalanga Energy Ltd (GKEL) for Rs 5,321 crore.
JSW Energy Limited share price jumped more than 5 percent on Tuesday after the company announced the take over 100% stake in GMR Kamalanga Energy Ltd (GKEL) ― the business unit of GMR Infrastructure that houses the 1,050 megawatts (MW) thermal power plant in Odisha ― for Rs 5,321 crore. JSW Energy’s installed power generation capacity will jump to 5,609 megawatts with the signing of the deal. JSW Energy share was trading at Rs 67.80 up from its closing on the previous day at 63.55.
In a filing to the market regulator, JSW Energy said, “The Company has signed Share Purchase Agreement with GMR Energy Limited, pursuant to which the Company shall acquire 100% stake in GKEL for a total consideration of an amount up to Rs.5,321 crore (subject to working capital and other adjustments).” With the new deal, JSW Energy will expand its footprint in the eastern region of India and diversify its fuel mix and offtake arrangements.
GKEL generated a revenue of Rs 2,195 crore in financial year 2019. GKEL supplies 84 per cent of its power generated to Bihar, Haryana, and Odisha under long-term power purchase agreements. JSW will take over Rs 3,951 crore existing debt of GKEL as a part of the transaction. “GMR Energy and JSW energy had entered exclusive discussions on GKEL in October 2019. Through this divestment, the entire debt of GKEL of INR 4141 Crores will be reduced,” said GMR Infrastructure in a press release.
Explaining the rationale behind the deal, JSW Energy said that the deal fits with the company’s strategic framework of acquiring assets with low power generation costs. With 84 per cent of the capacity already tied up under long term agreements with state discoms provides JSW Energy with a security buffer.
After the deal announcement, Motilal Oswal has upgraded the stock to a ‘buy’ rating with a target price of Rs 78. “We see the transaction as value accretive for JSWE, given the strategic location of the plant, room for merchant volumes, and the company’s ability to reduce interest and O&M costs post-acquisition. Moreover, the move lends visibility to JSWE’s capital deployment. We raise our FY21/22 EPS estimates by 15/8% to account for the takeover of Kamalanga from FY21,” said analysts at Motilal Oswal in a report.
JSW Energy is among the gainers on domestic indices which are trading in the red.S&P BSE Sensex was trading 235 points or 0.57 per cent lower at 40,820; while the broader Nifty 50 index was ruling at 11,966 points, down 79 points or 0.66 per cent.