Infrastructure Leasing and Financial Services (IL&FS) is in advanced talks to merge its wind energy assets with Chennai-based listed Orient Green Power.
The all-stock reverse merger of unlisted IL&FS Energy Development will value the combined entity at Rs 4,500-5,000 crore, said two people with knowledge of the matter. At 1,400 MW generating capacity, it will create one of India’s largest listed wind energy companies.
“The boards of IL&FS and Orient are expected to meet soon and discuss a merger proposal which, if cleared, will help the entity to acquire more wind energy assets,” said one of the persons quoted earlier. “The plan is to consolidate and use stock and cash to acquire assets that will help scale up capacity to over 2,000 MW by financial year 2018.”
IL&FS, India’s leading infrastructure financier, will be the largest shareholder with more than 50 per cent stake, followed by Shriram Ventures and Orix Corporation of Japan.
Private equity funds Bessemer Ventures and Olympus Capital — investors in the Shriram Ventures-proown minority stake. The merged entity will have Rs 1,200-crore operating profit on revenue of Rs 1,400 crore. Valued at seven times the operating profit, it will have a debt of Rs 3,500 crore.
IL&FS’ public relations agency said, “As a matter of policy, IL&FS does not comment on media and market speculation related to the group and its affiliate companies.” Orient Green Power did not respond to an ETquestionnaire until press time. There has been a surge in clean energy deals as companies raise funds to expand in this competitive, crowded but promising sector.
In March 2016, ILFS sold 49 per cent in the wind energy business to Japanese group Orix, which is an investor in the parent since 1993. “We are very pleased our partnership with IL&FS would diversify our portfolio into a fast-growing country like India,” Makoto Inoue, chief executive of Orix, had said at the time. “The larger vision of the government to scale up investment in the sector is attracting long-term strategic partners like us to invest in India.” India has set a target of installing 100 GW of solar capacity and 60 GW of wind capacity by 2022.
With more than Rs 65,000 crore debt accrued to build power plants and roads, IL&FS has been trying to sell off its non-core assets and bring down leverage ratio with capital infusion. Orient Power, which was running at a loss since inception, turned around in the second quarter of the previous financial year after restructuring its portfolio, extending the repayment tenure of its loans with promoters and infusing fresh capital.