The Ontario Teachers’ Pension Plan (OTPP) is in advanced talks to acquire a stake of about 49% in Mahindra Susten, the renewable energy unit of Mahindra and Mahindra, said people aware of the development. OTPP, one of the largest pension funds in Canada, is likely to pay ₹2,300 crores for the stake, valuing the company at ₹4,600 crore, inclusive of debt, they said, adding that both sides have signed a deal exclusivity clause.
This is the third attempt in the last two years by the Mahindra Group to offload a stake in Mahindra Susten. Investment bank Avendus Capital is advising Mahindra Susten after a sale process in FY20 run by Rothschild failed despite negotiations with Brookfield for a 100% acquisition.
Mahindra Susten was established to build solar parks under the National Solar Mission. Originally a part of its in-house incubation wing, Mahindra Partners, it was spun off as a separate entity as it diversified into engineering, procurement and construction (EPC), operations and maintenance, rooftop solar panels, data management and software services for third-party developers such as ReNew Power, Azure, SB Energy and others.
OTPP declined to comment. A Mahindra spokesperson told ET the company will “not be able to participate” in the story.
Mahindra Susten’s revenue fell 55% to ₹952 crore in FY21 from the year earlier as net profit slumped to ₹6 crore from ₹42 crore. Covid-led disruptions resulted in the loss of several construction days in the first half of FY21, deferment and cancellation of a few overseas projects, and slow mobilisation of existing under-construction projects, said an India Ratings report. Debt rose to ₹719 crore at the end of March 2021 from ₹466 crore in the year before.
As an independent power producer, Mahindra Susten has a total portfolio of solar projects with a capacity of 1.2 GW across the country. Its main operational assets include a 337.50 MW park at Rewa, a 175 MW project in Bikaner, an 84.50 MW plant at Charanka, Gujarat, and a 59.8 MW plant in Telangana. Being one of the top two independent solar EPC companies in the country, its portfolio includes projects, executed and under construction, with a peak capacity of 4.2 GW.
A deal will mark the debut of OTPP in the Indian renewable energy space. The Canadian fund has a strong presence in the Indian roads sector and has thus far stayed away from the booming clean tech arena, which has seen peers CPPIB, CDPQ dominate. OTPP was one of the contenders to acquire Actis’ renewable energy platform in India, Sprng Energy, which was bought by Shell. OTPP, which has net assets worth $36 billion in infrastructure globally, plans to invest another $16 billion in the next five years.