MUMBAI: Piramal Capital’s Structured Finance Group and Dutch partner APG Asset Management (APG) are investing Rs 1,900 crore ($300 million) in Hyderabad-based renewable energy producer Mytrah Energy India Pvt. through mezzanine debt instruments in one of their largest transactions, said two people aware of the development.
The proceeds will mostly be used to buy out existing investors such as Apollo Global Management, Aion, Goldman Sachs, Bank of America Merrill Lynch and IDFC Alternatives. About Rs 150-200 crore will go toward funding growth and refinancing debt.
Barring IDFC, the investors came on board in 2014. While Apollo and Aion invested $60 million (Rs 372 crore), the rest invested $30 million (Rs 186 crore) each, subscribing to the company’s non-convertible debentures (NCDs) and bonds. IDFC Alternatives has been invested in the company for about six years.
Spokesperson of Mytrah did not respond to queries. Piramal, Apollo, Aion, BoAML and Goldman declined to comment.
AIM-listed Mytrah is one of the largest renewable energy companies in India and has reached 1 GW of wind power generation capacity by adding 417 MW wind projects in one year. In 2016, the company entered into power purchase agreements for 140 MW of solar power capacity, bringing the total to 422 MW in Telangana, Punjab and Karnataka.
The new 400 MW solar business entered the construction phase in Telangana and Punjab, having secured close to $1 billion of finance during the year. Mytrah posted revenue of $362.23 million for the year ended December 31, up almost five times from $74.72 million in the year earlier. This was on the back of higher revenue from power generation and the inclusion of construction revenue.
“The results clearly reflect the growth Mytrah has seen in a span of six years,” Mytrah chairman Ravi Kailas said in June. “In 2016, we commissioned more wind capacity than ever before. This additional capacity helped drive our ebitda up 70% from last year on a directly comparable basis.”
Mytrah won a 250 MW wind power project in an auction held by the Ministry of New and Renewable Energy (MNRE) in February. In addition to the under-construction projects, the company has a pipeline of wind projects exceeding 4,000 MW and is also looking at further developing its solar business, including more large-scale government contracted plants as well as direct sales to private business customers.
Some legacy investors have been pushing for an IPO to reduce debt and seek an exit. According to disclosures made by Mytrah Energy, finance costs increased by $16 million at the end of June 2016 to $42.16 million, largely due to higher interest on newly commissioned operating assets. In a recent report, credit rating agency India Ratings said Mytrah had refinanced existing debt of 543MW of projects and in the process raised another Rs300 crore as the promoter’s contribution toward capital expenditure.
“By exploiting the tail period of these operational projects, the company has leveraged the balance sheet of the SPVs (special purpose vehicles) and raised additional debt,” the report said. “This has substantially increased the debt levels of the consolidated entity to about Rs6,200 crore from close to Rs5,200 crore at end-FY16.”
Mytrah is said to have been in talks with several investment banks including BoAML, Nomura and IDFC Bank to explore a $250-300 million public listing.
Piramal Capital’s appetite to do larger deals has increased over the years. It is part of the Ajay Piramal-led diversified conglomerate Piramal Enterprises. APG is the world’s second largest pension fund. They joined hands in 2014 to create a $1 billion dollar platform to invest in India’s roads, ports, airports, power plants, telecom towers and even the education and healthcare sector. Last March they deployed Rs 900 crore ($132 million) in Subhash Chandra’s green energy portfolio in what was till then their largest renewable energy bet. They have also backed Green Infra, Acme Solar in the past.
Pools of global and domestic capital are getting drawn by the ambitious commitment of the Narendra Modi government to expand renewable power capacity. This envisages investments of close to $150 billion to meet the 2022 target of 175 GW output, up from the current 57 GW. But solar tariffs hit a new low in May when SBG Cleantech, a joint venture among Bharti, Foxconn and Softbank, bid Rs 2.44 per unit for building a solar park in Rajasthan. Despite the decline in tariffs, overseas investors scouting for higher yields are keen to back the story in India, even if some are wary about long-term financial viability.