Reliance Power, a unit of the Anil Dhirubhai Ambani Group (ADAG), will offer 5% to an overseas power utility or a private equity (PE) fund on top of the 10% it is selling to the public, a person familiar with the development said.
Group officials are in talks with some Asian and Middle-East power utilities and global private equity funds. The transaction is likely to be concluded soon, the person added. The sale would be on top of the 10% that Reliance Power is selling to the public and the new investor may also get an option to increase his stake later.
The sale is being structured on the lines of the sale of equity to US giant Chevron Corp last year by Reliance Petroleum (RPL). In that transaction, Reliance Petroleum had sold 5% to Chevron just before its Rs 8,100-crore IPO. Chevron also got an option to increase its stake to about 29% some time before the commissioning of RPL’s 5,80,000 barrels per day refinery in Jamnagar. The sale was done at Rs 60 per share, the same as the IPO price.
Reliance Power’s stake sale may happen either at the IPO price or at a slight premium to the IPO price.
On Wednesday, Reliance Power announced its plans for an IPO to raise money for various power projects. The company is offering 130 crore shares (face value Rs 2) to the public. The promoters’ contribution will be 16 crore shares, leaving the net offer to the public at 114 crore shares. A Reliance ADAG spokesman declined to comment on the subject.
Reliance Power is setting up power projects of about 20,000 MW in various parts of the country. The gas-based Dadri project in Uttar Pradesh is the biggest with an estimated size of about 7,500 MW. The total investment required for all these projects is estimated to be at least Rs 70,000 crore spread over several years.
Assuming a 70:30 debt equity ratio, the company will need to raise a minimum of around Rs 20,000 crore as equity. The public issue is expected to raise about Rs 10,000 crore while the rest will come from the 5% sale to an outside investor.
Source: Economic Times