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‘Consolidation Is Bound To Happen In Renewable Sector’

‘Consolidation Is Bound To Happen In Renewable Sector’


Four years back, Munjal’s placed their bet on diversification in the renewable sector. In 2017, the company would be completing its first phase target of 1 GW and is all prepared for the next phase targets, despite of demonetisation setting them back with delayed projects. Aligning the company’s targets with the aggressively growing renewable market, Sunil Jain, CEO Hero Future Energies, shared his company’s plans and outlook in the coming future in an exclusive interview with BW Businessworld.

You recently received funding from IFC. It’s the first time you raised money externally.
The family has been funding the company so far. They have put in anywhere around $125 million. We wanted to grow faster than the money they had put in. They said, fair enough, we have no objections. But then don’t come to us for large chunk of money at the same time as the family is expanding in other business as well. They gave their happy go ahead. It is good to get an outside investor because that marquee investors verifies your diligence, stamping your business model and states what you are doing is right. It took us a year to close the deal. In today’s world we should not be foolish in trying to do everything ourselves. ‘Make good partnerships and make the partnerships succeed’. That is our mantra!

So how would be the capital expenditure post funding, given your targets for the next fiscal?
First target is 1 GW, which we will be completing this year and then next target is 2 GW for 2019-2020. Between solar and wind it is very difficult to define a concrete portfolio. Our aspiration is 50-50 and we are not sure of the changing market scenario. Therefore, up to June July, we are fully funded. After that is another GW target and with the falling costs, closer to a billion dollars would be required or lower. Out of that 75% will come from the equity and rest will come from debt. Debt is not an issue for us, we are fairly good at that point. There are very innovative methods of financing that have come in. We have already raised the green bonds. Masala bonds have not been that successful and we are not finding too much traction in the international market.

Plans to go for an IPO?
IPO plans would depend on how desperate we are for money. Until and unless there is a dire need for the promoters to monetize something, there is no need to go for an IPO. IPO has its own issues. But if you get a really good value, then why not. We do not have anything planned for the next 10 months as of now. Sometimes in the heat of the market, people get good valuations and this fizzles out. What OGPL did to the market 5 years back and I had told OGPL that you would spoil the market and that’s exactly what happened.

How do you see the sector flaring in the next coming years. Do you forsee consolidation?
One thing that is for sure is that there will be consolidation. It is bound to happen. There are many players like Ostro Orange which are PE backed. PEs have to exit. Fund life is limited and they will have to take an exit call. So whenever they exit, somebody else will come. Therefore people will try to consolidate the platform. So far we have not seen many defaults. The sector is doing fairly well when it comes to funding. The valuations have been going up only unlike the Flipkarts and the Snapdeals of the world, which started off with a bang and now doing down. When the leader of the industry goes down, they take along with them the entire sector. Renewable if you see, the major players doing well, keeps the sector attractive for the money to come in.

Do you think being a family promoted company, gives you an edge over other PE backed firms?
There is one major difference that’s sets us apart from our peers. If you look at my counterpart across the sector, the majority are PE backed with the founder of the company being the CEO. But he is not in control of the equity. That’s the main difference. But they are doing fairly well. Take for instance Renew power. Hero is a big brand, it’s a household name. Tata and Hero are the only 2 corporate promoted companies, the others are all PE backed. The bankers are much more comfortable when a strong promoter is behind the company. There is a huge line between the promoters, the founders and the third party capital. Their own stakes are very limited; hardly anyone has more than 10%.

You have not been very aggressive with your overseas expansion…
We have already floated a company in London and Singapore and we are planning to look at more markets abroad and diversify our geographies. There are many new attractive markets coming in southeast Asia, Africa and some parts of Europe as well. So we are evaluating each country with regards to their merits and policies. So we hope to see new projects coming in 2017-18. We have too much on our hands in India at the moment, so have not been very aggressive with foreign expansion.

Anand Gupta Editor - EQ Int'l Media Network


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