Moneycontrol Bureau
Investors queued up for buying shares of Monnet Ispat on Friday after the company entered into discussion with JSW Energy for selling controlling stake in power subsidiary. The stock is locked at 20 percent upper circuit at Rs 42.75 (at 09:47 hours IST). There were pending buy orders of 187,315 shares, with no sellers available.
Monnet Ispat and Energy said it has signed non-binding memorandum of understanding (MOU) with JSW Energy for entering into discussion to sell majority and controlling stake of its subsidiary, Monnet Power Company Limited (MCPL).
MCPL is engaged in the business of developing 1050 MW (2 x 525) Coal fired thermal power plant located at Malibrahmani, Angul Orissa.
Sanjay Sagar, CEO of JSW Energy (in an interview with CNBC-TV18) said due diligence will take 45-60 days for completion.
The company will decide on share and valuation only after due diligence process is complete, he added.
"We are looking at inorganic growth very aggressively and this is just one of the projects which we found attractive. We are currently evaluating a few projects, are likely to conduct due diligence for 5-6 projects, and may decide to acquire 2-3 projects," Sagar said.
According to him, the stake in Monnet Power will be “fairly higher” than a controlling stake (51 percent).
Sources told CNBC-TV18 that JSW is looking to pick up over 87 percent stake in Monnet Power for Rs 3,500 crore.
Brokerage Morgan Stanley said assuming valuations in media articles are accurate and for an 87.5 percent stake, the deal would be valued at Rs 34-38 million per MW – at the lower end of thermal power deals announced recently and below replacement cost, even after factoring in the capex yet to be done.
JSW Energy has sought shareholder's approval to raise up to Rs 5,000 crore through equity issuance for inorganic growth opportunities and is comfortable with leverage of 2.5 times, it added.
On a pro forma basis, incorporating deal with Jaiprakash Power Ventures Ltd. (hydro assets) and MP (assuming debt funding), JSWE’s net debt/equity ratio would be 2.1x in F16e, said the brokerage.
According to Morgan Stanley, aggressive bids for coal blocks and the seller's eagerness to deleverage are key determinants of deal valuation.
At 09:47 hours IST, the scrip of JSW Energy was quoting at Rs 99, down Rs 0.10, or 0.10 percent on the BSE.
Posted by Sunil Shankar Matkar
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