Sterlite may sell $2 billion stake in energy unit

Sterlite Industries (India) Ltd, the nation's biggest copper producer, plans to sell a stake worth as much as $2 billion (about Rs 8,000 crore) in its energy unit to build power plants, three people familiar with the matter said.

The group may sell 15 per cent of Mumbai-based Sterlite Energy Ltd to investors, said the people, asking not to be identified because the talks are private. The sale may raise between $1.5 billion and $2 billion, they said.

Prime Minister Manmohan Singh is doubling investments in power because shortages cause blackouts in most of India, curbing economic growth.

The spending plan is luring investors to shares of Sterlite, controlled by billionaire Anil Agarwal's Vedanta Resources Plc, and Reliance Energy.

"These days big investments are being made to raise the nation's power generation capacity since it is imperative the nation add large quantities of power,'' said Jayesh Shroff, who holds Sterlite Industries shares among the $6 billion he helps manage at SBI Funds Management Pvt in Mumbai. "The power sector is the happening sector in India.''

Reliance Energy has more than tripled this year, the best performing stock on the benchmark Sensitive Index, and the group's Reliance Power Ltd unit plans to sell shares for the first time.

Sterlite Industries rose 3.3 per cent (or Rs 29.25) to Rs 919.10 at the close of trading on the Bombay Stock Exchange on Thursday. The stock is up 69 per cent this year, valuing the company at $16.3 billion (about Rs 65,200 crore).

Share sale
Sterlite Industries raised $1.75 billion (about Rs 7,000 crore) to invest in power in June, driving a record year for stock sales by Indian companies.

The group said on November 7 Sterlite Energy may sell shares or debt to expand its electricity generating capacity to 10,000 mw. Most of the projects would be completed in five years, it said in a statement to the Bombay Stock Exchange.

The group may consider an initial public offering of Sterlite Energy next year after the stake sale, the people said.

Dhanpal Jhaveri, spokesman at Vedanta, declined to comment. Vedanta, India's largest producer of copper and zinc, controls 68 per cent of Sterlite Industries.

Sterlite Industries sold shares in the US in June to fund a 2,400 mw power plant in Orissa, where the group is building a 500,000 tonne aluminum smelter to meet rising global demand for metals.

Power projects
India, which generates 1,28,182 mw of electricity, plans to set up eight large power projects, each generating more than 4,000 mw.

Power Grid Corp, India's main transmission company, sold shares this year to fund a more than doubling of the nation's network to 77,690 miles, long enough to circle the earth three times. The stock has gained 72 per cent since the initial sale.

The government plans to spend Rs 6.17 trillion ($155 billion) by 2012 to boost generation and upgrade transmission and distribution networks, up from Rs 2.89 trillion in the past five years.

The finance ministry estimates a power shortage is responsible for cutting gross domestic production by a tenth.

Share sales by Indian companies almost doubled this year to Rs 66,200 crore, as a rally in the nation's stock market and accelerating economic growth lured investors.