StanChart PE eyes part exit in Powerica IPO

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Standard Chartered Private Equity (SCPE) is part exiting its three-and-half-year-old investment in the initial public offer of Mumbai-based genset manufacturer Powerica, which is looking to raise Rs 650 crore through a fresh issue besides offer for sale by promoters, a couple of management executives besides the private equity firm.

SCPE had invested Rs 150 crore in Powerica and bought shares from one of the promoters for another Rs 50 crore in October 2007. Pre-issue, it owns 11.7% stake in Powerica which is likely to fall below the 10% mark post issue. SCPE that has invested through two funds is looking to sell a little more than a third of its total shares in the IPO.

The promoters are also selling a chunk of shares by offering around 2 million out of 40 million shares held by them pre-issue that gives them over 87% stake in the company.

SCPE's average cost of purchase after bonus and stock split comes out to around Rs 360 per share. Assuming the company would be looking to sell shares much above this price, the total issue size would easily be over Rs 800 crore, according to VCCircle estimates. Issue price around Rs 450-500 would value the company at Rs 2800-3000 crore or USD 625-660 million.

This will value the company 22-24 times its annualised earnings for the year ending March 31, based on net profit of Rs 67 crore for the first half of this financial year on revenues of Rs 523 crore.

Powerica plans to use the issue proceeds to part finance an over Rs 1,000 crore project. It had entered into a agreement with Danish wind power turbine maker Vestas last September to jointly construct and develop wind farms aggregating to up to 225 MW.

Powerica needs to be involved with land purchase and construction of access roads, obtaining necessary approvals, facilitating execution of power purchase agreement, construction of platforms for the wind turbines, supply of sub-station materials, erection and commissioning of sub-stations, evacuation approval besides supply of materials  for internal overhead lines or underground cables. The rest of the project will be implemented by Vestas.

The agreement provides Powerica a right of first refusal to acquire the wind farms being jointly developed under the MOU up to an aggregate capacity of 200 MW from Vestas. Of the 200 MW, 70 MW shall be made available in the fiscal year 2012 and 130 MW in the fiscal year 2013.

By: Madhav Chanchani