Adani Transmission has raised $310 million (around Rs 2,213 crore) through private placement of debt in the US to refinance existing borrowings, sources aware of the fundraising told ET.
According to sources close to the transaction, global investors such as Barings, Cigna, HSBC Global Asset Management and MetLife have bought the 30-year amortising debt. Covenants include the requirement of a debt service coverage ratio, cash trap, and comprehensive compliance certificates every six months.
A detailed query sent to AdaniNSE 1.88 % Transmission remained unanswered until the publication of this report. Individual financial companies, which are believed to have bought the bonds, could not be immediately reached for their comments.
“This fundraising is purely to move away from short tenure domestic debt to long tenure global infrastructure paper. This transaction re-introduces private debt investors into India’s infrastructure sector as they have stayed away for over a decade,” an executive involved with the transaction told ET.
Adani Transmission had total outstanding debt of Rs 19,000 crore as on September 30. Between FY16 and 1HFY20, the company’s net debt to operating income ratio has marginally increased to 4.3 from 4.2, but the company has been able to change its debt profile to extend maturity in order to improve returns and lower the refinancing risk. With the new issuance that concluded on Friday, the average maturity of the company’s debt increases to a tenure of 10 years from nine years.
Adani Transmission has issued several bonds in the ‘144a/RegS’ format, including a $500-million, 16-year bond in November 2019. It is trading at 4.19%. The private placement pricing was based on that, a source close to the deal said.
The company reported consolidated net profit of Rs 230 crore in the second quarter of FY20, up from Rs 90 crore in the same quarter in the previous year, driven by the electricity distribution business and the seven new transmission projects it commissioned in FY19.
The company’s total income was Rs 2,638.32 crore in the quarter ended September as against Rs 1,462.56 crore a year ago. The company has a cumulative transmission network of more than 14,738 circuit kilometres, out of which more than 11,477 circuit kms is operational while the balance is under various stages of construction.
“This reflects that global investors are ready to invest in Indian infrastructure. The power sector has had many regulatory issues and payment issues, but investors realise that within the sector, there is an asset class that does not have problems. There are inquiries coming from other investors for investment in other assets of similar nature,” the executive said.
Brokerages have a positive view on Adani Transmission given its asset portfolio. But the biggest risk to power transmission companies is the stress in the power generation and distribution sector.
The government’s ambitious Ujwal DISCOM Assurance Yojana (UDAY) scheme of 2016, which aimed to reform the power distribution companies’ performance to reduce stress in the sector, has failed to deliver. “Discoms remain the weakest link in the power sector and the budget did little to address their issues in some detail,” SBI Capital Securities said in a post-budget note.
