Lack of fresh capacity addition, relatively low plant load factor and rising receivables from state transmission companies could weigh on valuations
Orix Corporation is likely to exercise its right of first refusal if bids to acquire the renewable energy business of Infrastructure Leasing & Financial Services (IL&FS) falls below the threshold price of Rs 2,300 crore, sources told The Economic Times.
The Japanese financial services group is IL&FS second-largest shareholder and has interests in leasing, life insurance, real estate and corporate lending. It had acquired 49 percent stake for Rs 2,300 crore in 2016.
A right of first refusal is incorporated in M&A deals and allows the existing shareholder the option to first buy the assets before they are sold to a third party. If Orix chooses to enforce this contractual right, it would not sell its stake at a valuation below Rs 2,300 crore and could trigger the right of first refusal to buy out the asset
Cash-strapped IL&FS is selling its clean power assets portfolio, either together or separately, to pare its Rs 91,000 crore debt. It has an installed wind energy capacity of 875 MW and had reported an operating profit of around Rs 600 crore in FY18.
However, lack of fresh capacity addition, relatively low plant load factor and rising receivables from state transmission companies could weigh on valuations, the report said.
Various state-owned entities, as well as financial investors, have been approached for the acquisition of the assets, the paper had reported last week.Some of these suitors may choose to opt out given uncertainties surrounding the sector and falling valuations, sources said, adding that private equity investors and pension funds looking at a foothold in the Indian renewables space may place bids.