Cash-strapped infrastructure company IVRCL Ltd has agreed to sell its entire stake in its subsidiary Chennai Water Desalination (CWDL) to Dubai-based Utico FZC, according to a stock market disclosure. The stake sale is part of Hyderabad-based IVRCL's strategic business plan to monetise its BOT and BOOT assets.
"The 100 per cent equity valuation of CWDL arrived for this transaction is around Rs 150 crore," the company said in the filing to the BSE.
The two companies signed a non-binding agreement for the transaction, which is expected to be completed in three months.
The transaction is, however, subject to approvals from Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB), lenders and other applicable authorities and satisfaction of certain agreement-related conditions.
CWDL was floated as a special purpose vehicle to set up a 100 million litres a day seawater desalination plant in Chennai on a build, own, operate and transfer (BOOT) basis for 25 years, with a project cost of around Rs 550 crore. While IVRCL held 75 per cent stake in CWDL, the remaining 25 per cent stake is held by Spanish partner Befesa Agua.
The project has been operational since July 2010 with a 25-year concession period under a bulk water purchase agreement signed with CMWSSB.
In the financial year ended on March 31, 2014, CWDL clocked a turnover of Rs 185 crore, an increase of 3.71 per cent over the last financial year.
The net-worth of CWDL as on March 31, 2014 is Rs 24 crore which is 1.17 per cent of consolidated net-worth of IVRCL as on March 31, 2014. IVRCL reported a loss of Rs 716 crore in FY14 on revenues of Rs 4,305 crore.
The infrastructure major IVRCL is said to have put up Rs 4,000 crore worth of assets for sale to reduce its mounting debt. The company is also in talks with Tata Group firm TRIL Roads Pvt Ltd to offload three road projects. Earlier in July, the Corporate Debt Restructuring Cell (CDR) had approved an almost Rs 7,000-crore debt recast proposal for IVRCL.
Utico provides utility services in the Middle-East. The company is said to be the largest private utility in UAE and specialises in water and power utilities, sewage and industrial effluent treatment plants and district cooling systems.
EY acted as the exclusive M&A advisor to IVRCL for this transaction.
(Edited by Joby Puthuparampil Johnson)