 "Sterlite Power gets stakeholders' nod to demerge its biz into 2 entities")
Sterlite Power Transmission Ltd (SPTL) on Thursday received the nod of its stakeholders to demerge its business into two entities -- the power transmission project development and power equipment manufacturing.
The demerged transmission infrastructure will be under Sterlite Grid 5 Limited and Global Products & Specialised EPC Services will continue to remain under SPTL, the company said.
The company in a statement said, simplified structure will allow each entity to attract a capital pool tailored to its requirements.
“The infrastructure business can target long-term, patient investors seeking predictable cash flow, while SPTL, focusing on the Global Products & Services (GPS) business, can attract capital seeking higher returns typically suited for pre-IPO or capital market investors,” it said.
Speaking with Business Standard virtually, Pratik Agarwal, managing director, SPTL said, both businesses have different investor base and business model and are going through massive tailwinds with the growth in their respective sectors.
“Transmission is a capex heavy build and holds assets suitable for sovereign funds, pension funds etc. Manufacturing business is more conventional and is better suited for the capital market and more private equity type of investors. This way each investor can choose where they want to invest,” he said.
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He also added, the GPS business was suitable for the IPO and that will be explored as well.
“IPO for our GPS business is our top two options for raising more equity capex. Once the final order of the demerger comes through then we can start engaging with banks and ask them the best option. Top five peers in this market are all listed firms. So the market understands this business very well,” Agarwal said.
The GPS business of SPTL clocked cumulative order wins worth Rs 7,000 crore during financial year 2023-24. It represented a 35 per cent year-on-year (YoY) increase as compared to FY23.
Agarwal said, there is both global and domestic demand for robust power transmission infrastructure, especially for integrating renewable energy sources.
In India, Agarwal said they are betting on the growth coming from power distribution utilities which are bolstering their power supply infrastructure with the rising demand.
“We are doing close to Rs 300-400 crore capex in our product line including a greenfield project in cables, including underground cabling, extra high voltage (EHV) and high voltage cables,” Agarwal said.
He said as cities experience high population density, power utilities are transitioning from overhead to underground cabling which would be a focus area for their GPS business.
“We are seeing a very large market getting created for high voltage and extra high voltage cables. In India, that segment is growing at 15 to 25 per cent and more overhead lines are being put underground. So that is a space where we are number one or two in the country. IN HV and EHV we are looking to add more capacity very soon,” Agarwal said.