The widening demand-supply gap in power generation is turning out to be a ‘blessing in disguise’ for India’s leading captive power and diesel generator manufacturers. While Goldman Sachs is set to buy around 10% stake in Delhi-based Sudhir Gensets for $100 million, Standard Chartered Private Equity (SCPE) is buying 11% stake in Mumbai-based Powerica, another leading equipment maker, for around $50 million.
Investment banking sources said the power sector, particularly captive power companies, is attracting private equity (PE) investors. “Even if the government initiates any action today, it would take at least five years for the demand-supply gap to narrow. Till then, captive power is the only solution,” says a senior country manager at a UK-based PE firm.
For Goldman Sachs, investments into India’s infrastructure, especially the power sector, will remain key, said sources. The global investment banking firm has already invested around $800 million across various sectors in the country since early 2006.
Among the two genset makers, Powerica caters to the western and south Indian markets while Sudhir Gensets serves the northern market. Powerica has a tie-up with Man of Germany for setting up captive power plants of size less than 2 MW.
Both the companies are well-established and had been fully-owned by business families. Sources said both companies would look at tapping the primary market in a couple of years.
“The funds will be used for expansion projects in genset manufacturing. We will look at an IPO later, maybe in three years,” said Bharat Oberoi, director (marketing) of Powerica.
The Oberoi family owns the company, with Naresh Oberoi heading it. Powerica supplies DG sets to a majority of big corporates in Maharashtra, and has notched up an annual turnover of over Rs 1,000 crore. It has a 1,200-strong workforce including 300 engineering professionals.
A senior official at Sudhir Gensets said they are looking to increase production capacity by setting up two more facilities — one in Jammu and another one at Manesar. Sudhir’s existing facilities are at Athal, Gurgaon, Silvassa and Bari Brahamna in Jammu. The company is the leading name in the captive power generation business for all gensets in the range of 15-2,000 kva (kilo volt ampere) in single units in synchronising mode. Among its leading clients are Reliance Industries, Indian Airlines, Bharti, DLF and Indian Oil.
Source: Economic Times