Billionaire Gautam Adani is looking to buy a large power transmission project from debt-laden Essel group, two people aware of the discussions said. This will be the latest in a series of acquisitions that has helped shape his infrastructure conglomerate’s dominance in ports and airports.
The ₹4,000-crore project involves laying about 941km of transmission lines across Maharashtra, Telangana and Andhra Pradesh, and building a sub-station at Warangal. It is being developed by Warora Kurnool Transmission Ltd (WKTL), a special purpose vehicle set up by Essel Infraprojects Ltd in April 2015.
“This is one of the biggest transmission projects ever given out to the private sector to develop and operate. However, given Essel’s debt problems, they had been struggling to bring in the equity needed to complete the project and, hence, the lenders have initiated a substitution process to bring in a new sponsor to develop the project, which is Adani Transmission Ltd. The process has been led by Yes Bank, which is the main lender for this project,” one of the two people cited above said on condition of anonymity. The process is currently awaiting regulatory clearances, he added.
The total project cost of ₹4,000 crore is to be funded through a debt of ₹2,790 crore and equity of ₹1,210 crore, according to the latest credit rating report by Care Ratings. As of 31 December 2018, Essel group had infused only about ₹458.5 crore equity into the project. Around ₹1,200 crore debt has been disbursed so far for the project, the person cited above added.
This will be the first transfer of an asset through the substitution route in the transmission space, said the second person cited above.
“The substitution route was brought in to make it easier for stressed sponsors to exit projects. It helps the lenders to replace the struggling sponsor with one that has a stronger balance sheet and can execute the project and operate it,” the second person added.
Emails sent to Essel, Adani group and Yes Bank remained unanswered.
In the last few years, the Adani group has expanded significantly through acquisitions. In the ports sector, where Adani is already the largest private sector port operator, the group has recently acquired a 75% stake in Krishnapatnam Port Co. Ltd for an enterprise value of ₹12,000 crore.
It is also in the process of acquiring the under-construction Dighi Port in Maharashtra under the corporate insolvency resolution process.
Last month, the group said it will take control of India’s second-busiest airport of Mumbai.
Adani has entered into a definitive pact to buy the debt of GVK Airport Developers Ltd, against which a 50.5% stake in Mumbai International Airport Ltd (MIAL) has been pledged.
The Adani group will also buy the combined 23.5% stake held by Airport Co. of South Africa (Acsa) and South Africa’s Bidvest group in MIAL. This would give the group a 74% stake in MIAL.