Adani Group may buy Jindal Power; valuation likely at Rs 18,000-20,000 crore, inclusive of debt.

Industry:    March, 2016

Naveen Jindal-promoted Jindal Steel & Power Limited (JSPL) is in advanced discussions with Adani Group to sell its power generating subsidiary – Jindal Power (JPL), four people familiar with the development said. The transaction, which could end up being the largest in the power sector till date, values the business around Rs 18,000-20,000 crore, inclusive of debt, the people added on condition of anonymity as the talks are still private. The move is aimed at deleveraging the consolidated balance sheet and a substantial portion of it may be used to retire debts of its parent’s steel arm. As on FY15, the Jindal group’s consolidated debt was Rs 45,500 crore and the deal, if it goes through, will help pare it by half. On standalone basis though, Jindal Power is one of the most underleveraged companies. With an installed capacity of 3,400 mw, its total long-term debt is aboutRs 5,120 crore,” said one of the persons quoted above. Profitability of both its key steel and power businesses have been impacted on the back of acute coal shortage, falling realisation and no material improvement in utilisation of recently commissioned assets. “Even after adjusting debt, the net proceeds from the deal would be upward of Rs 13,000 crore that would help JSPL bring down its debt to a manageable level to aboutRs 20,000-21,000 crore,” said the person. “JSPL as a part of its corporate policy doesn’t comment on speculative reports. We would certainly inform our stakeholders, including media, in event of any news/development relating to JSPL’s businesses,” a group spokesperson told ET. An Adani Group spokesperson also declined to comment. JPL, the first domestic private sector player o commission an independent power plant (IPP) in 2007, has a total installed capacity of 3,400 mw set up at coal pitheads. This includes a 1,000 mw plant (250mw X4) located at Raigarh district of Chhattisgarh with another plant of 2,400 mw (600 mw X4) capacity situated at Tamnar, also in the same state. JSPL also has 1,649 mw of captive power units in Chhattisgarh and Odisha. The company had earlier announced an internal restructuring transferring some of these assets into the power subsidiary but is still not clear if the divestment will include them as well. One of the sources said there has been a proposal to sell the entire portfolio of 5,049 mw in one shot but that could not be independently verified. Another source added that plans to sell JSPL’s captive units to its power arm faced resistance from the company’s lenders.