The Indian power sector has emerged as the new darling of global private equity players. Following in the footsteps of Farallon Capital, L N Mittal Group, Lehman Brothers and TPG Growth, Actis and New Silk Route are in the race to invest around Rs 300 crore in Hyderabad-based Ind-Bharat Power.
This investment comes close on the heels of the Rs 300 crore that Ind-Bharat raised from Citigroup Ventures and UTI Ventures. According to the information available, Motilal Oswal is running the mandate to secure this round of investment. Ind-Bharat Power focuses on the development of power projects of various capacities using different kinds of fuel and technology.
The rush to invest in the power sector stems from the fact that the country needs to generate an additional 70,000 mw to meet its growing power requirements. This investment, if it fructifies, will follow Farallon Capital, L N Mittal India and Internet Ventures' investment of $395 million in Indiabulls Power Services, TPG Growth's $50 million in KLG Power and Lehman and IDFC Private Equity's $125 million in Konaseema Gas.
According to a recent report by Venture Intelligence, PE firms made a total investment of $990 million (Rs 4,158 crore) in the first five months of this year in this sector compared to just two deals worth $45 million (Rs 189 crore) during the same period last year. Currently, Ind-Bharat has five operational power plants, while three are under implementation and an additional three under pipeline.
According to a recent research report by Associated Chambers of Commerce and Industry of India (Assocham), the Indian power sector has attracted more than $4 billion during this year – about a third of the corporate sector's total investment. “As power is one of the top priorities of the policy makers, huge investments have been planned by various companies, including Tata Power, Sterlite Industries, Jindal India Thermal Power and Lanco Group,” the Assocham report noted recently.
The power sector requires a total investment of $155 billion. It is being driven by the fundamental changes in the Electricity Act 2003 that aim to make it more competitive and bring back the interest of private sector in the development and operation of power plants in India.
Source: Business Standard