JSW Energy set to raise ₹21,000 crore for acquisitions
MUMBAI: Sajjan Jindal is readying a war chest to buy out stressed assets in the power sector. Shareholders of Jindal-promoted JSW Energy Ltd on Thursday voted to give the company board the power to raise up to ₹21,000 crore through various securities. This included ₹5,000 crore via issuing non-convertible debentures, up to $750 million (over ₹4,800 crore) via foreign currency bonds and masala bonds, and up to ₹7,500 crore by issuing fresh equity.
Jindal, however, declined to give out details of assets his company is actively pursuing and termed the shareholder approvals as “enabling resolutions” for the future. He, however, said that the company is a buyer in the market.
JSW’s fund-raising preparation comes at a time when at least 18,000 megawatts (MW) of coalbased power plants are stranded due to lack of power purchase agreements, fuel supply or last mile funding due to the poor financial health of their promoter groups.
Separately, the central bank is also pushing banks to speedily clear up non-performing assets on their books, a significant portion of which originates in the power sector.
To be sure, an enabling resolution had been passed by the company’s shareholders to raise a similar ₹7,500 crore via equity issuance during the company’s last annual general meeting in July 2016, but the board hadn’t utilised the limit.
There is no doubt that such a large resource mobilisation is an indication that JSW is looking at acquisitions, said G Chokkalingam, founder of Equinomics Research and Advisory. “I, however, doubt if this is the right time to acquire power assets, given the structural changes that are happening in the sector,” he said.
In the last three years, JSW Energy had completed the acquisitions of two hydropower projects from Jaiprakash Power for ₹9,275 crore. It had also reached an agreement to acquire the latter’s thermal power plant at Bina (which is expected to be completed by December).
Despite structural challenges such as threats from renewable power and fewer power purchase agreements, JSW Energy is seen as a logical buyer for thermal assets. It has one of the healthiest balance sheets in the sector, with a consolidated net-debt-to-equity ratio of 1.29 and a net-debt-to-Ebitda ratio of 3.78.