Anil Ambani-led Reliance Infrastructure Ltd. inked a pact on Wednesday with Gautam Adani's Adani Transmission Ltd. to sell its transmission assets in order to further reduce the company's soaring debt.
The deal size has not been disclosed in the company's press statement, but a senior official of Reliance Infrastructure, who did not wish to be named, told BloombergQuint that it stands at Rs 2,000 crore .
Reliance Infrastructure is looking to sell three transmission projects as part of this transaction – Western Region System Strengthening Scheme (WRSSS) B and C projects located in Maharashtra, Gujarat, Madhya Pradesh, and Karnataka and Parbati Koldam Transmission Company Ltd. (PKTCL) located in the state of Himachal Pradesh and Punjab in joint venture with Power Grid Corporation of India Ltd.
The company announced the sale of these assets as part of a strategic plan to divest its non-core assets in order to pare debt.
Contours Of The Deal
The proceeds from the deal – a combination of debt and equity – will be used in reduction of debt and the transaction would be EPS (earning per share) accretive for shareholders.
In the recently-concluded annual general meeting of the company, the Reliance Group head Anil Ambani said the company was looking to become debt free on a consolidated basis.
Prior to this deal, the company's total consolidated debt was around Rs 21,000 crore, the official quoted above said. With this deal, that figure should come down to Rs 19,000 crore, he added.
The company is also in the process of divesting its road assets and 49 percent stake in its Mumbai power distribution and generation arm. The consolidated debt will come down to around Rs 10,000 crore once both the transactions complete by the end of this financial year 2016-17, the same official said.
The company hopes to divest stake in its Mumbai power businesses by the end of financial year 2016-17, he added.
Following the divestment of these non-core assets, the company will be debt free on a standalone basis while the consolidated debt will be around Rs 10,000 crore, the official said.
In August this year, the company had sold its cement business to Birla Corporation in a Rs 4,800 crore deal.
Future Plans
Going forward, the company is looking to aggressively pursue projects in railways, metros, power department and other mega public-private partnership (PPP) projects, according to the same official.
As a part of this plan, the company announced, in a recent media statement, its intention to bid for more than Rs 1 lakh crore worth projects in its EPC (engineering, procurement, and construction) segment in the next 12 months.
The defence segment will be another area of focus. Recently, the company in a joint venture with Dassault Aviation agreed to manufacture parts for Rafael fighter jets in India. The Rs 2,000 crore acquisition of Pipavav Defence and Offshore Engineering Company Ltd. has boosted its defence segment and the company hopes that excluding Pipavav Defence, the defence arm will start generating revenue by next year, the official said.
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