Troubled Essel Infra puts solar, road assets on the block

29 January 2019 - 12:00 am UTC

Essel Infraprojects is in talks to sell its solar energy portfolio to Actis and has also put its road portfolio on the block, sources said.

Essel has 685MW solar capacity, including six operational projects and six under development projects.

“The negotiations for the solar assets are in the final stages, due diligence is on and if all goes well the deal can be concluded in the current financial year itself,” a source close to the situation said. India’s financial year ends in March.

The deal is likely to be in the region of INR 40bn (USD 562m) to INR 45bn (USD 633m), a banker said. 

Last year, Essel was in talks with GIC-backed Greenko Energy to sell the solar assets before the negotiations fell through. Apart from solar, Essel also has 163MW hydro and 560MW wind capacity.

Essel has 14 road projects, of which six are national highways and the rest are state highways, according to the company website.

According to sources, the company has started initial discussions with Caisse de dépôt et placement du Québec (CDPQ), Brookfield, Canada Pension Plan Investment Board (CPPIB) and I Squared Capital-backed Cube Highways. The talks with investors are on, both for the entire portfolio of road assets or for the individual projects, the banker said.

The solar and road assets have been on the block for some time now, but the pace of negotiations have accelerated in the past month, the first source said.

Essel Infraprojects is part of the Essel Group, which has interests across media, technology, entertainment, packaging, education and precious metals as well as infrastructure.

Over the past week there has been a sharp decline in the shares of Essel Group companies on the bourses amid investor concern the company is facing a liquidity crunch and may not be able to service its loans.

On Monday (28 January), the company told the stock exchanges that it has entered into an agreement with its lenders for its pledged shares that there will be no default declared due to the steep fall in the company’s share prices. The Essel Group has reiterated a “speedy resolution through strategic sale” of assets and stake in group companies, the exchange filing said.

“As with most of the infra companies, even we have made some incorrect bids,” Essel Group Chairman Subhash Chandra wrote in an open letter to shareholders on 25 January.

Chandra said despite making losses on their infrastructure projects, the Group has continued to service all its debt and has made losses of about INR 40bn to INR 50bn.

Chandra blamed wrong acquisitions in other businesses and said the situation became “further unmanageable after the IL&FS issue came to public light.”

The default crisis at IL&FS, India’s biggest infrastructure largest private infrastructure financier and developer, had made banks and non-bank finance companies extra cautious in lending to infrastructure companies.

“Till then, we were managing our borrowings efficiently. The IL&FS meltdown stopped the roll overs, diminishing our ability to service our borrowings,” he wrote in the letter.

In October, Essel sold four power transmission projects to Edelweiss-backed Sekura Energy Ltd. for an enterprise value of INR 60bn.

Actis declined to comment on “market speculation.” Essel, Brookfield, CDPQ, CPPIB and Cube did not respond to requests for comment.

 

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