Reliance Infrastructure to sell 49 per cent stake in Power business

Reliance Infrastructure (RInfra) to sell 49 per cent equity stake in the company’s integrated power generation, transmission and distribution business in the city of Mumbai and adjoining areas to Public Sector Pension Investment Board (PSP Investments). The PSP Investments is one of the largest pension fund managers in Canada with Canadian dollar 112 billion of net assets under management as of March 31, 2015.

According to media reports, the Canadian fund will pay around Rs 3500 crore for the stake, if the deal takes place. The Mumbai circle licence, along with the generation, transmission and distribution asset, will be transferred to a PSP Investment, which will then offload the stake. Around Rs 8000 crore of debt will also be transferred to the subsidiary. Rinfra will utilise proceeds of stake sale to reduce debt. The company has total debt of Rs 25766 crore as of FY15. This deal will help Reliance Infra substantially reduce its debt by Rs 11500 crore.

The specified business is to be carved out on a going concern basis into a separate Special Purpose Vehicle (SPV), in which RInfra will own the controlling 51 per cent stake, and PSP Investments will own 49 per cent. The company's Mumbai Power business (known as Reliance Energy) distributes power to nearly 3 million residential, industrial and commercial consumers in the suburbs of Mumbai, covering an area of 400 sq km, and catering to a peak demand of over 1800 MW, with revenues of Rs. 7700 crore in FY 2014-15.

RInfra's shareholding pattern indicates that FII holdings expanded by 27 basis points to 18.58 per cent while DII holdings contracted by 79 basis points to 17.02 per cent during September 2015 quarter. The company's share price increased by 1.19 per cent on bourses in early trades and is trading at Rs 409.8 on intraday basis.

RInfra is one of the largest infrastructure companies, developing projects through various SPVs in several high growth sectors within the infrastructure space such as Power, Roads, Metro Rail, Cement and Defence. The company is also a leading utility company having presence across the value chain of power businesses i.e. Generation, Transmission, Distribution and Power Trading. It has recently entered into the defence sector. The Maharashtra Government has allotted 290 acres of land at Mihan near Nagpur for the development of India's first smart city for the defence sector known as Dhirubhai Ambani Aerospace Park (DAAP). RInfra has also announced the proposed acquisition of Pipavav Defence and Offshore Engineering Company (PDOC), which houses India's largest dry dock facility to build warships and other naval vessels.