Renewable energy producer Mytrah Energy India Pvt. Ltd is close to raising around Rs800 crore (about $120 million) from Piramal Enterprises Ltd’s Structured Finance Group (SFG), three people aware of the development said. Talks are at an advanced stage and the deal is expected to be closed by October end, they said. Hyderabad-based Mytrah Energy, one of the largest in the renewables sector, operates about 920 megawatts (MW) of wind energy capacity and recently won projects for about 500 MW of solar energy capacity.
The fundraising comes ahead of the company’s plans to go public. In September, Mint reported Mytrah Energy has hired investment banks Nomura Financial Advisory & Securities (India) Pvt. Ltd and IDFC Bank Ltd to start working towards a public listing that could see the firm raise between $250 million and $300 million. “The funding from Piramal will help Mytrah in refinancing part of its existing debt and also fund the development of its project pipeline,” said one of three people cited above, requesting anonymity as the talks are private. Mytrah had long-term borrowings of $752 million as of 30 June, data from its website shows.
In April 2015, Mytrah raised $60 million in debt funding from Merrill Lynch International and Aion Direct Singapore. Earlier in November 2014, the firm had raised another tranche of debt worth around $70 million from Merrill Lynch International and funds managed by affiliates of Apollo Global Management Llc. Also in April, the Asian Development Bank sanctioned loans of up to $175 million to Mytrah to back the power producer’s new wind and solar projects. Emails sent to a spokesperson at Mytrah Energy went unanswered. Piramal SFG said in an e-mail response that it frequently evaluates various investment opportunities. Once certain criteria are met, internal approvals follow, after which financial and legal diligence are conducted.
“Projects that come out of this filtration process are then placed before the board or its duly empowered committee for approval. It is an established practice that only those proposals that are definitive and which are disclosable events, are disclosed to the stock exchanges. Any disclosure prior to this would only be speculative,” it said. The transaction, if closed, will be the third major investment in the renewable space by the SIG group (now SFG) of Piramal Capital.
In August, Mint reported that the Ajay Piramal-controlled Piramal SFG was investing around Rs800 crore in Delhi-based solar power producer ACME Solar. ACME’s portfolio (commissioned and under development) stands at 1,519 MW, which includes 490 MW in Telangana, 310 MW in Andhra Pradesh, 104 MW in Punjab, 100 MW in Rajasthan and other projects in Gujarat, Madhya Pradesh, Odisha, Bihar, Uttar Pradesh and Chhattisgarh. ACME Solar aims to commission 960MW of projects by March 2017. In March, Mint reported that Piramal Enterprises and Dutch pension fund asset manager APG Asset Management were jointly investing $132 million (Rs900 crore) in Essel Infrastructure Ltd’s solar platform across India.
The solar platform, Essel Green Energy Pvt. Ltd, owns 160 MW of solar assets in four Indian states, of which 110 MW is operational and 50 MW is under construction. The firm plans to raise capacity to 1,000 MW over the next two to three years. Experts, however, believe that fundraising environment for renewable energy companies is becoming a concern. “Financing is a concern even for renewable companies now due to more incidents of delayed payments and higher intermittency,” said Kameswara Rao, partner at consultancy PricewaterhouseCoopers Pvt. Ltd (PwC). Rao added that investors will be keen on investing in companies that have achieved significant scale and have a portfolio diversified across geography and asset classes.
“Larger renewable companies have fared better as their cash flows are diversified across different states. Also, with a portfolio spread across different asset classes, their cash flow is also better spread across seasons. This gives them better returns,” Rao said. The investment from Piramal SFG comes at a time when the non-real estate financing business unit is becoming a critical part of Piramal Enterprises. SFG is expanding its product portfolio, from current mezzanine funding, to include offerings such as loans against shares and senior debt. SFG is also expanding its sector focus beyond its core area of infrastructure and renewable energy. SFG has already taken the first step towards expanding its sector focus. On 23 August, Mint reported that SFG had agreed to invest Rs150 crore in Smaaash Entertainment Pvt. Ltd, a sports-based entertainment firm co-owned by cricketer Sachin Tendulkar.
Some of the infrastructure investments by SFG include Rs615.5 crore funding in two cement firms and buying non-convertible debentures (NCDs) of Sanghi Industries Ltd, the flagship company of the Ravi Sanghi Group, worth Rs265.50 crore. Piramal SFG has also invested Rs350 crore in NCL Industries Ltd, the owner of the Nagarjuna Cement brand; Rs500 crore in Green Infra, an alternative energy firm; and Rs425 crore in Navayuga Roads, according to its website.