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Abu Dhabi’s Masdar seeks to acquire minority stake in Hero Group’s clean energy arm

Masdar Clean Energy, wholly owned by the Abu Dhabi government’s Mubadala Investment Company, is seeking to acquire a minority stake in the Munjal family-led Hero Group’s clean energy arm.

Masdar, also known as Abu Dhabi Future Energy Company, plans to subscribe to equity shares in Hero Future Energies Global Ltd (HFE UK) and non-voting compulsorily convertible preference shares in Hero Future Energies Pvt. Ltd (HFE India), according to a filing made to the Competition Commission of India.

The proposed deal represents Masdar’s entry into India’s renewable energy sector. The investment would help the two Hero Group companies add value to their businesses and benefit Masdar from HFE’s profitability and growth, the filing said.

The financial details of the transaction couldn’t be ascertained immediately.

VCCircle has reached out to Hero Future on the proposed acquisition and will update the report accordingly.

However, a report in The Economic Times earlier this month suggested that Masdar was looking to acquire a 20% stake in Hero Future for a consideration of $150 million (approximately Rs 1,062.69 crore at current exchange rates). Masdar was being advised by BNP Paribas, while JP Morgan was advising Hero Future.

Masdar will own 20% following the investment, while the International Finance Corporation will own 27%, with the remaining being held by the company’s promoters, according to the report.

Masdar, which currently does not have any presence in India, focusses on providing solutions in energy, water and urban development and clean technologies. It is fully owned by the Abu Dhabi government’s Mubadala Investment Company, and develops commercially viable renewable energy projects in the Middle East and North Africa region, according to its website.

Hero Future Energies is backed by Hero Group, a diversified conglomerate run by the Munjal family. The group’s flagship is Hero MotoCorp Ltd, India's largest two-wheeler maker. The family owns a majority stake in the company through its investment vehicles, while the International Finance Corporation and its infrastructure fund are also significant shareholders.

Hero Future’s chairman and managing director is Rahul Munjal, the eldest nephew of the Hero group chairman Pawan Munjal.

The proposed minority acquisition by Masdar comes after the IFC in April offered to provide debt financing of up to $43.3 million (Rs 300 crore) for the construction of a 250-megawatt project at Bhadla in Rajasthan. In 2016, IFC and its Global Infrastructure Fund had each invested $62.5 million in renewable energy company.

The larger renewable energy segment in India is continuing to see heavy interest from both alternative and strategic players, especially considering the government’s target to achieve a renewable energy capacity of 260 gigawatts by 2024. The country’s renewable power capacity soared by almost 150% in the last five years to 77.6 GW, while the government set a target of 175 GW by 2022.

Earlier this month, global energy giant Royal Dutch Shell Plc acquired a stake of almost 20% in Orb Energy Pvt. Ltd, a Bengaluru-based solar power services provider. The company said the investment by Shell’s New Energies business would help it provide lower-cost solar power to more Indian small and medium-sized enterprises.

Shell has also invested in biomass company Punjab Renewable Energy Systems Pvt. Ltd., Husk Power Systems Pvt. Ltd, and Cleantech Renewable Assets Pte. Ltd.

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