The renewable energy sector has faced funding challenges in the past due to paucity of funds and the high cost of capital, say analysts. Photo:
Welspun Renewables Energy Pvt. Ltd (WREPL), a renewable energy company with solar and wind power generation projects, has initiated discussions with investment bankers to raise around Rs.1,000 crore through an initial public offering (IPO), said three investment bankers who have met the company seeking a mandate for the IPO. Welspun Renewables is a group company of Welspun Corp. Ltd.
On Monday, Bloomberg reported that the offering is likely to take place in the next financial year. Welspun Renewables declined to comment. Welspun Corp gained 0.96% to close at Rs.68.25 per share on Monday on BSE, while the benchmark Sensex lost 0.21% to close at 29,122.27 points.
According to the company’s website, it has commissioned 366 megawatts (MW) of solar and wind power projects and another 978MW capacity is presently under construction. Its power plants are spread across Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Karnataka and Andhra Pradesh. Its engineering procurement and construction (EPC) arm has commissioned three rooftop solar projects for Indian Institute of Technology-Kanpur, Ansal University and Medanta Medicity Hospital.
In December 2014, Welspun Renewables had raised Rs.630 crore in debt from a consortium of financial institutions for its 126MW wind project in Pratapgarh, Rajasthan.
On 23 June 2014, it had raised $50 million in equity funding from Asian Development Bank by selling a 25% stake. The investment was the largest direct equity investment in clean energy by the Manila-based ADB.
Separately, in April 2014, GE Energy Financial Services had invested $24 million in a 151 MW solar photovoltaic power project of Welspun Renewables. Other renewable energy companies are also considering public issues.
Hindustan Power Projects Pvt. Ltd, a power generation company run byRatul Puri, is looking to raise capital from the public markets by listing the holding company.
“We certainly intend to do an IPO of our holding company. We are waiting for our thermal power asset to get commissioned in this fiscal year and post the commissioning of the asset we will look at potentially listing the holding company,” Puri, chairman, Hindustan Power Projects had told Minton 19 December 2014.
Though Puri did not disclose the size of the proposed issue, he said it would be a substantial amount and added that a listing would allow its existing private equity investor to exit.
In August 2010, global private equity fund Blackstone Group Lp had invested $300 million in Hindustan Power Projects for an undisclosed stake.
Hindustan Power Projects is in the midst of commissioning a 2,520MW thermal power plant in Anuppur in Madhya Pradesh. Puri, who started investing in solar power during his days in his father’s company, Moser Baer India Ltd, plans to add another 450MW to the company’s existing solar power capacity of 350MW, which requires a capital outlay of Rs.3,500 crore. Part of the capital raised through the share sale programme will be used to fund this exercise, Puri said.
According to Mercom Capital Group, a renewable energy consultancy firm, solar power installations in the calendar year 2015 are expected to more than double to 1,800MW. “Recent cancellations of coal mining licences by the Supreme Court amid rising coal imports and increasing costs and continuing power shortages have all contributed to the positive momentum in the solar sector,” said Raj Prabhu, co-founder and chief executive of Mercom Capital Group.
A second consultant said that the renewable energy sector has faced funding challenges in the past due to paucity of funds and the high cost of capital. While primary issuances may help ease some of these constraints, only a select few will be able to access the markets.
“However, only companies which have a big brand name will be the ones who can go for an IPO; other mid-sized companies in the renewable space would find it very difficult to raise capital,” said the consultant requesting anonymity as he is not authorized to speak on specific companies
(This news story is from Live MINT)