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Piramal Enterprises Ltd and private equity fund Bain Capital Credit’s distressed asset investment platform plans to acquire KSK Energy Ventures Ltd’s partially commissioned 3,600 megawatts (MW) power plant in Chhattisgarh.
There has been a growing interest in the stressed assets space, given the promise of competitive valuations. “The distressed asset platform announced by Piramal Enterprises and Bain Capital is in talks to acquire the Mahanadi power plant,” said a person aware of the development, requesting anonymity.
Another person who didn’t want to be named confirmed that “the Mahanadi project is up for sale”. Mint couldn’t ascertain the value of the potential transaction.
While several funds have announced their intention to invest in distressed assets, not many deals have happened yet.
In March, Infrastructure Leasing and Financial Services Ltd said it partnered with global private equity firm Lone Star to jointly invest $550 million in stressed infrastructure projects in India for asset purchases of up to $2.5 billion.
Tata Power Co. Ltd last year partnered with ICICI Venture Funds Management Co. Ltd to invest $850 million in power projects. The platform has commitments from Canada’s Caisse de dépôt et placement du Québec (CDPQ), Kuwait Investment Authority and Oman’s State General Reserve Fund.
Analysts have expressed concerns about the stressed power projects.
JM Financial Research, in a 8 March note, wrote that its 2016 study of stressed power assets had concluded that of the total 28 gigawatts (GW) generating capacity in question, assets accounting for 14GW were at high risk.
The government this month gave the Reserve Bank of India, or RBI, broad powers to deal with specific bad loans cases as it tries to speed up resolution of Rs9.64 trillion of non-performing assets, or NPAs, clogging the Indian banking system.
While a Bain Capital spokesperson declined to comment, queries emailed to the spokespersons of Piramal Enterprises and KSK Energy last week remained unanswered.
Conventional energy projects in India have been hit hard by solar projects, with tariffs dropping to a record low of Rs2.44 per unit last week. Even though solar is an intermittent source of electricity supply, it will have an impact on electricity from other fuel sources such as coal.
According to information available on KSK Energy’s website, the partially commissioned Mahanadi project has six units of 600MW each of which 1,200MW capacity has been commissioned. The platform from Piramal Enterprises and Bain Capital Credit is looking at a large deal.
“Once finalized, the platform will invest capital directly into businesses and/or acquire debt of such businesses to drive sensible restructurings. The sponsors believe that there is an over $1 billion investing opportunity in this space over the next few years,” said a 23 August joint statement from Piramal Enterprises and Bain Capital.
“The platform’s mandate would be to look at all sectors, other than real estate, as an asset class. Within these, the platform’s preference will be to invest in businesses that require restructuring and have fundamentally strong growth prospects linked to India’s infrastructure and consumption needs,” the statement added.
India plans to invest as much as Rs3.96 trillion in the current financial year to bankroll its new integrated infrastructure planning paradigm comprising roads, railways, waterways and civil aviation.
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