Industrialist Anil Ambani’s Reliance Infrastructure Ltd is in talks with billionaire Gautam Adani-led Adani Transmission Ltd to sell its power generation, transmission and distribution business for Mumbai city.
The two companies said in separate stock exchange filings that they have entered into an exclusivity agreement until 15 January 2018 to evaluate the transaction. They didn’t disclose any financial details.
Reliance Infrastructure said it aims to use the proceeds from the proposed transaction to reduce its debt, and strengthen its financial position to tap into growth opportunities in defence and engineering sectors.
The company, like the group’s telecom arm Reliance Communications, has been struggling to repay its high debt and has been selling its cement, road and power assets.
Reliance Infrastructure had, in November 2015, signed a pact to sell a 49% stake in its power business in Mumbai to Canada’s Public Sector Pension Investment Board, but the deal didn’t fructify.
In December last year, the company agreed to sell its power transmission assets in the western region to Adani Transmission at an enterprise value of Rs 1,000 crore ($148 million). This deal was completed on Monday.
Adani said the proposed transaction for the Mumbai business will strengthen its footprint in the power transmission sector and mark its maiden foray in the electricity distribution sector.
Reliance posted consolidated revenue of Rs 27,036.47 crore for 2016-17. The Mumbai power distribution business registered revenue of Rs 7,532 crore. It has about 29.7 lakh customers. The power generation business includes the 500-megawatt Dahanu thermal station.
Adani Transmission is part of the Adani group. In 2016-17, the company posted consolidated revenue of Rs 2,901.55 crore. It is the largest power transmission company in the private sector and owns and operates around 5,450 circuit km of transmission lines, according to its annual report.