RInfra, Adani Transmission stocks gain, following exclusivity agreement

Lester Mason
October 12, 2017

Adani Transmission's proposed exclusivity agreement to acquire the power generation, transmission and distribution assets of Reliance Infrastructure would be incidental on right valuation of assets as experts believe anything above two times the regulated equity of Rs 3,500 crore would be negative for the company. According to Adani Transmission, the proposed transaction will strengthen its footprint in the power transmission sector and also mark its foray into the distribution space.

Adani Transmission's shares were locked at the 10 per cent upper circuit at Rs 193.25 on the BSE Tuesday following the announcement of exclusivity talks with Reliance Infrastructure to buy the Mumbai city power business. Accordingly, there can be no certainty that a transaction will result.

Debt-laden Reliance Infrastructure proposes to utilise the entire proceeds of the proposed sale to reduce its debt, and strengthen its financial position as the company moves on to tap growth opportunities in defence and engineering procurement construction (EPC) in the infrastructure sector. Again, in August this year, there were reports that Greenko, one of the country's leading renewable energy companies, was in discussions with Rel Infra to buy its Mumbai assets.

If the deal materialises, it will enable will the Adani Group make an entry into the power distribution business. Currently, Reliance Infra has a consolidated debt of Rs 29,000 crore as on June 30 and the proposed sale coupled with other initiatives is expected to trim its debt to Rs 20,000 crore. The Anil Ambani-led firm intends to use the proceeds from the proposed sale to pare debt. In 2015, Rel Infra signed an agreement with Canadian pension fund, Public Sector Pension Investment Board to sell 49% in its Mumbai assets for an enterprise value of Rs 15,000 crore.

Mint reported in October that another group company, Reliance Communications Ltd, which recently called off a planned merger of its wireless unit with Aircel Ltd, is preparing to monetize assets ranging from spectrum to real estate as it tries to repay Rs45,000 crore of debt.

The company in a filing to BSE had said that it "respectfully" disagrees with the views of India Ratings. HT Media is contesting the case.

Other reports by Iphone Fresh

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