QIA to pick 25% stake in Adani's Mumbai power distribution business

Adani Transmission on Wednesday entered into an agreement to sell a 25.1 per cent stake in its Mumbai power distribution business to Qatar Investment Authority (QIA) for Rs 3,200 crore. The power transmission company acquired the business from Reliance Infrastructure for Rs 12,100 crore in August 2018. At present, the business is housed under its subsidiary Adani Electricity Mumbai (AEML). 

In a statement, Adani Transmission said the company, AEML, and a subsidiary of QIA had entered into a definitive agreement. The agreement is “for the sale of a 25.1 per cent stake in AEML to QIA and for a shareholder subordinated debt investment by QIA in AEML,” it said.

The agreement requires the Mumbai distribution business to source 30 per cent power from green alternatives. ATL and QIA have agreed to definitive plans to ensure that over 30 per cent of the electricity supplied by AEML is sourced from solar and wind power plants by the year 2023. The transaction is likely to be complete by early 2020, subject to receipt of regulatory approvals and satisfaction of customary conditions.

“We believe this transaction is a significant step in the journey of the Adani Group, marking the start of a long-term partnership with QIA,” said Gautam Adani, chairman for the group. 

An email query to Adani Transmission on what was the rationale for the divestment remained unanswered.

“The company’s current fund requirements for the transmission and distribution business can be met without any divestment. Proceeds from the stake sale may be used to build a corpus to fund equity investments in future transmission acquisitions or for other distribution circles that come up for bidding,” said an analyst, who did not wish to be identified. 

This is the Adani group’s second stake sale to a foreign investor or company this year. In October, French energy company Total entered into an agreement for a 37.4 per cent stake acquisition in Adani Gas.

The transaction from QIA is also the first time a sovereign fund will be investing in India’s power distribution business.