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Sterlite Power Grid Ventures sells bulk of stake in KKR, GIC-backed IndiGrid
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Power transmission firm Sterlite Power Grid Ventures Pvt Ltd on Friday sold almost its entire stake in India Grid Trust (IndiGrid), the infrastructure investment trust it had initially sponsored, for Rs 850 crore ($114.8 million).

Sterlite Power sold about 85.51 million IndiGrid units at Rs 98 apiece. A major part of the proceeds will be utilised to repay L&T Infrastructure Finance, IndiGrid’s lender which released the pledged units.

Buyers included engineering company Larsen & Toubro Ltd; and foreign funds Societe Generale, Morgan Stanley Asia Singapore and Danske Invest India, a fund managed by Aberdeen Asset Managers. These entities cumulatively bought shares worth Rs 405.77 crore.

Sterlite Power had pledged its 15% stake in IndiGrid to L&T Infrastructure Finance in October last year for a loan of Rs 640 crore. At the time, the 87.5 million units pledged to the non-bank lender were valued at Rs 750 crore.

The latest deal is significant as it comes just days after private equity firm KKR & Co stepped back from buying an additional 15% stake it was contracted to purchase as part of a pact reached in May last year. VCCircle reported earlier this week that commercial and regulatory considerations were behind KKR’s decision to not buy the additional stake.

KKR, which currently holds a 23% stake, is the single-largest investor in IndiGrid. If it had acquired the 15% shares held by Sterlite Power, it would also have become the sponsor of the InvIT that owns and manages power transmission assets. 

As per the original deal, KKR had acquired the 23% stake at Rs 84 per unit. At the time, Singapore sovereign wealth fund GIC had also invested in the InvIT.

KKR was to buy the additional stake at the same price by July 15 this year. However, the InvIT's market price has zoomed past the Rs 100 mark since the original deal. This difference between the market price and the price at which KKR had locked the deal was one of the reasons for its collapse.

KKR may have been hampered also by the Securities and Exchange Board of India’s guidelines on investments in InvITs. The capital markets regulator issued the guidelines only on July 17.

While KKR remains the single-largest unit holder in IndiGrid, it does not qualify as a sponsor because that requires an entity to own at least 25% of the InvIT.

Having said that, KKR continues to own a majority 60% of SIML and is obligated to acquire another 14% by May 2021 from Sterlite Power.

IndiGrid is the country’s only publicly listed InvIT in the power sector. The InvIT was set up in 2016 by Sterlite Power Transmission Ltd under unit Sterlite Power Grid. It was listed the following year and now manages assets worth Rs 12,300 crore after acquiring an asset in Haryana earlier this year.

Eight of the 10 power transmission assets that IndiGrid manages are from Sterlite Power, IndiGrid CEO Harsh Shah had told VCCircle in a recent interview.

Meanwhile, as a recent VCCircle analysis showed, Sterlite Power Transmission has been plagued by high debt and project delays. The company recorded losses in 2015-16 and 2016-17, turned a corner the following year and slipped back into the red the year after, the analysis showed.

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