Adani Power, which bought Lanco’s troubled Udupi thermal plant for an enterprise value of Rs 6,000 crore on Wednesday, will refinance the Rs 4,000 crore of Udupi Power Corporation's debt it assumed as part of the transaction value, according to a source familiar with the matter.
Adani Power may fund the Rs 2,000-crore cash portion of the deal by either issuing NCDs or funds from promoters, the source added.
“The details on the cash portion of the deal have still not finalised. The management is weighing various options,” the source said. However, a qualified institutional placement (QIP) is not immediately on the cards.
The Adani group had cash and cash equivalents balance of Rs 3,257 crore as on March 31, 2014.
“Adani Power’s current balance sheet cannot accommodate the Udupi acquisition without equity infusion, in our view...Adani Enterprises can either lever up or raise equity at group level, sell down stake in Adani Ports & SEZ among other options to support Adani Power’s Udupi acquisition, in our view,” JP Morgan analyst Sumit Kishore wrote in a August 14 report.
The transaction is expected to be completed over the next two months.
The Udupi project has been mired in litigation as the regulator had refused to clear the Rs 5,600 crore of capital expenditure attributed to the plant, and with dues of more than Rs 1,800 crore as on March 31, 2014 pending to be received from state-owned power distribution companies (discoms), analysts said.
The Central Electricity Regulatory Commission (CERC) had passed a final tariff order in February 2014 raising the tariff to Rs 4.47 per unit from Rs 4.11 decided in the interim order. However, the discoms disputed the order and continued to pay based on the old tariff, which led to under-recoveries for the plant. In June, the Appellate Tribunal of Electricity (APTEL) ordered the discoms to make payments for the current year at the final tariff determined by CERC and to clear the arrears of Rs 331 crore as raised from February 2013 to March 2014, according to a CRISIL report dated August 6.
Analysts said Adani stands to gain from the acquisition only if it gets the receivables due to the Udupi project as a part of the deal.
“It will be critical to see who retains the receivables (and interest thereon),” Nomura analyst Anirudh Gangahar said in an August 14 report. “If APL retains the receivables, the initial Rs 2,000-crore cash outflow to