NEW DELHI: India’s power utilities are likely to take a cue from the telecom sector in mergers & acquisitions, say experts. Recently, the Singapore Wealth Fund acquired Greenko’s renewable assets in India. The Abu Dhabi Investment Authority, along with Goldman Sachs Capital Partners, acquired ReNew Power Ventures in India.
Experts say that in the Indian power sector, specifically the thermal generation space, is in a bit of distress due to high debt and lack of power purchasing agreements.
“There are many players who entered the market not fully understanding the risks and challenges of managing power business. Those players and projects are now available for acquisition,” said Abhishek Poddar, lead partner - energy and processes industries, A.T. Kearney India.
Industry observers such as Shyam Wadhera, former member of Delhi Electricity Regulatory Commission, and director - projects in the Power Finance Corporations, feel the stakeholders have just scratched the tip of potential M&A possibilities in power sector in India.
“The government could further ease up the steps for M&A to provide necessary impetus,” said Wadhera.
He feels 2017 could be the year when a shakeout can happen in power sector, as more consolidation has begun following clarity in major policy decisions.
“But, to make it viable and attractive for potential suitors, banks have to be ready to take a haircut on their debt — something they have resisted so far,” said Poddar.
He says that in some cases, promoters should be open to bearing equity losses. It is critical since any further delay in the sale of distressed assets could add more stress to the banking system.
“It could result in the banking system taking more pain than the haircuts that financial institutions need to take now,” noted Poddar.