A 3i India Infrastructure Fund-led consortium is in talks to pick up a 4-4.5% equity stake in Adani Power for $ 400 million (Rs 1,800 crore). The transaction, a pre IPO deal, would value the power company at a staggering $10 billion, much higher than other private sector power firms including Reliance Power and Tata Power.
According to an Economic Times report, the consortium of investors may include Singapore's Temasek besides another infrastructure fund. Adani Power, which is majority-owned by Adani Enterprise, is in the process of floating an initial public offer.
For 3i India Infrastructure Fund, which announced the final closure of its $1.2 billion fund early this year, this would be a follow-on fund infusion into Adani Power. The fund had pumped in $227 million (Rs 900 crore) into the power company in October 2007.
This fund has been set up to invest in four infrastructure fields-- power, roads, ports and airport sectors and is looking to build a portfolio of 10 investments. Besides its original investment in Adani Power, it also put in $101 million in Soma Enterprises.
3i India Infrastructure Fund currently holds 8.55% in Adani Power. However, this will get diluted to 7.32% post the public issue. According to its filings with the market regulator Sebi, Adani Power is looking at raising capital by issuing around 29.7 crore shares through pre-IPO placement and the public issue.
The report hints that 3i India Infrastructure Fund may be looking at maintaining its holding in Adani Power through the pre IPO transaction. If that's the case then it would have shelled out an additional Rs 500 crore (out of the Rs 1,800 crore) in the pre-IPO deal.
If the pre-IPO deal goes through at such valuations, then Adani Power would be the second most valued listed power company after public sector power generator NTPC. Power sector companies commanded high valuations till January. But the stock market crash and the poor performance of Reliance Power post the IPO issue, led to a significant correction in the their stocks.
Reliance Power which had come up with a mega issue had raised more than $2 billion dollar and had initially commanded a valuation of around $20 billion. However the company is currently valued at just about Rs 38,000 crore or $9 billion.
Adani Power is looking to build power projects with a capacity of 9,900 MW spread across Gujarat, Maharashtra and Rajasthan. The first unit is expected to be commissioned in Mundra in 2009. In all, the power projects are estimated to require investments worth Rs 43,139 crore(close to $10 billion). This is to be funded through a debt equity ratio of 80:20.