Sembcorp to acquire IDFC stake in India power business for Rs 1,400 crore

Sembcorp to own 100% stake in SGI; acquisition to be funded via mix of internal funds and borrowings

Singapore-based Sembcorp Industries (Sembcorp) has said it would acquire IDFC’s stake in Sembcorp Green Infra (SGI) in a Rs 1,410.2-crore deal, or for approximately $301 million. Its wholly-owned subsidiary, Sembcorp Utilities, has entered into an agreement to acquire IDFC Private Equity Fund III’s remaining 28 per cent stake in SGI. With this, Sembcorp would become the sole owner of SGI.

“Pursuant to the prevailing shareholders’ agreement between the parties, Sembcorp Utilities has exercised its contractual right to acquire IDFC’s remaining shares in SGI. The consideration for the acquisition was agreed between the parties based on, amongst others, comparable market valuations, and an assessment of SGI’s assets and business prospects,” the company said in an announcement on Thursday.

This is the largest exit across all funds managed by IDFC Alternatives, generating a 3.2x return for IDFC PE Fund III. Girish Nadkarni, partner (private equity), IDFC Alternatives, said, “We have been focussed on exits, and this marks the 36th exit from a portfolio of 42 investments at 19 per cent IRR (internal rate of return). We have executed an aggregate exit of approximately Rs 2,500 crore in SGI in the past 2 years.” 

SGI is one of the largest renewable energy players, present across seven states in India. It was awarded 250 megawatts (Mw) in India’s first national wind power tender earlier this year.

 “The deal will allow us to drive SGI’s growth as the 100 per cent owner, and increase our investment in a wind and solar generation portfolio that strongly complements our thermal power assets in the country,” said Neil McGregor, group president and chief executive officer of Sembcorp. “Strengthening our investment in renewables will also help us stay abreast of advances in greener power generation, and will enable us to deliver electricity to our customers in an increasingly sustainable manner.”

 Vipul Tuli, CEO and country head of Sembcorp India, said, “With the far-reaching energy reforms and electrification underway in India, there is a demand for both renewable and thermal power in the country. Sembcorp’s acquisition of IDFC’s stake in SGI strengthens our position as a reliable provider of clean and low-cost power to support India’s growing energy needs.”

SGI has close to 1,200 Mw of the wind and solar power capacity in operation and under development. As of 2016-end, the net asset value and net tangible asset value at SGI were $427.6 million and $426.9 million, respectively. The net profit at SGI for the 12-month financial period ended December 31, 2016, was approximately $39.0 million.

 The acquisition would be funded through a mix of internal funds and borrowings, and payments would be settled in Indian rupees. The completion of the deal is expected to take place in the first quarter of 2018, the company said. “Save for their respective shareholdings in Sembcorp, no director or controlling shareholder of Sembcorp Industries had any interest in this transaction,” Semcorp said in the statement.

 Sembcorp has operations across five continents worldwide. With facilities of about 11,000 Mw of gross power capacity and close to 9 million cubic metres of water per day in operation and under development, Sembcorp also provides water solutions to industrial and municipal customers. It is one of the major players in the field of marine and offshore engineering. It is also an established brand name in urban development.