CDPQ buys additional 10% stake in Apraava Energy for Rs 660 crore

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Global investment group Caisse de dépôt et placement du Québec (CDPQ) has increased its stake in Apraava Energy (formerly known as CLP India) to 50% by acquiring an additional 10% stake in the company for around Rs 660 crore. 

The deal is strategic to Apraava Energy’s aims to double its portfolio and potentially tap the capital market with an initial public offer by 2025-26, Rajiv Ranjan Mishra, Managing Director, Apraava Energy, told Moneycontrol.

Apraava Energy is jointly owned by Hong Kong-based CLP (formerly China Light & Power) Group and the Canadian pension fund CDPQ. Once the transaction is completed, CDPQ Infrastructures Asia II will become a 50% owner of Apraava Energy and the latter would cease to be a subsidiary of the CLP Group, the latter told bourses in Hong Kong.

“This is a vote of confidence from CDPQ since they have been invested in the company for almost three and a half years. Also, with the company becoming a joint venture, CLP will not be loaded with the debt of Apraava. This will give the additional freedom to Apraava to increase its investment significantly so that it can double the size in the next three years,” Rajiv Ranjan Mishra, Managing Director, Apraava Energy Private Ltd, told Moneycontrol.

In September 2018, CDPQ had announced the acquisition of 40% in CLP India for $368 million (around Rs 2,650 at the time), in a deal which was the largest fundraising through private investment in the Indian renewables sector at the time.

“The original objective of CDPQ coming in was for CLP India to partner with similar long term investors, which will enable the company to grow faster. We started off with two large acquisitions and we won a large greenfield bid. But then there was Covid related slowdown and a hiatus and some regulatory challenges. With all that over, now it seemed like the appropriate time for our investor to acquire more stake and make it a joint venture,” Mishra said.

Doubling by FY26

Apraava Energy, which is in power generation and transmissions and aims to expand its presence in the electricity distribution sector as well, aims to double its portfolio in the next 3-4 years by investing close to Rs 17,000 crore.

“The strategy of the two shareholders is to grow the company to double the size, hopefully by FY26, and at that time widen the shareholder base by bringing in local shareholders potentially through an IPO,” Mishra said.

Apraava Energy, which in its older avatar had been among the earliest foreign entrants in India’s power sector, currently operates 3,150 megawatts (MW) of power capacity. The company is open to growing organically and is also looking out for acquisition opportunities.

“We will continue to be a diversified company. Roughly speaking, we will be adding 1 gigawatt equivalent capacity a year; some of the growth would be from transmission, distribution and not just power generation. All of this would be in the zero carbon growth area,” Mishra said.

No China Overhang

CLP India was rebranded as Apraava Energy in October 2021. Before that in 2020, the company’s ownership came under the scanner amid border hostilities between India and China. In 2020, the Indian government made prior approval mandatory for foreign direct investment (FDI) from countries that share a land border with the country, making it tough for companies with China connections to bid for projects.

“This became a big issue for us in 2020. I wouldn’t pretend it didn't affect us; it affected our growth for close to one and a half years. It was an issue,” Mishra said.

But he is quick to add that CLP India had managed to get all the necessary clearances from the government, even if it lost some time. But the deal announced by the company and the subsequent change in shareholding is not particularly aimed at dissolving its parentage.

“The issue was debated and settled. It’s not like the government told us to reduce CLP shareholding. If the company is now no longer seen as a CLP subsidiary, it is a side effect of the deal. It is not the driving force behind it,” Mishra said.