Rinfra to sell Mumbai power business to Adani
₹18,800 cr deal likely to be closed by March
MUMBAI: Reliance Infrastructure Ltd (Rinfra) on Thursday said it has signed a binding agreement to sell its Mumbai power business to Adani Transmission Ltd for ₹18,800 crore.
While initially the company will be paid ₹13,251 crore, about ₹5,000 crore will come into the company’s books after the successful resolution of certain regulatory issues, most likely in 2018-19, Reliance Infrastructure CEO Lalit Jalan told Mint .He added that the deal is likely to close by March 2018.
The deal will see the Adani Group taking over the distribution of over 1,800 megawatts (MW) of power to roughly 3 million customers in Mumbai and 500MW of thermal power generation capacity.
In a statement, Gautam Adani, chairman of the Adani Group, said: “We see a massive growth opportunity and will look at both organic and inorganic opportunities to build a market-leading distribution company. With this acquisition, Adani Transmission will enjoy benefit of scale and of being an integrated distribution and transmission in India.”
Reliance Infrastructure said the entire proceeds from the sale will be utilised to repay debt and post the deal, it will turn debtfree. As of September, the company owed lenders well over ₹10,000 crore. “This monetisation is a major step in Rinfra’s deleveraging strategy for future growth,” the company said in a statement.
The hiving off of the Mumbai power business, however, doesn’t mean the end of the road for Reliance Infrastructure’s power distribution dreams.
“We have our Delhi distribution business, which is twice the size of Mumbai distribution,” Jalan said.
The focus of the firm, however, is now clearly on its engineering, procurement and construction (EPC) and defence portfolios. “Our main focus area for growth will be EPC and defence. Today, our EPC order book, including the ones where we have been declared L1, is in excess of ₹10,000 crore and in 2-3 years will build up to ₹50,000 crore,” Jalan said. L1 stands for lowest bid in a tender.
In the quarter ended September, EPC accounted for just 11% of Reliance Infrastructure’s revenue. The deal between Reliance Infrastructure and Adani Transmission is not the first between the two. Back in October, the former had sold its Western Region System Strengthening Scheme (WRSSS) business to the latter for ₹1,000 crore.
The deal will help Adani Transmission add about 540 circuit kilometers to its existing network, which stood at 5,448 circuit kilometers as of March 2017. The company has a stated objective of owning 20,000 circuit kilometers of transmission lines under it by the year 2022.