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Shapoorji Pallonji Group on Sunday announced its second asset sale as part of deleveraging its tight balance sheet, selling 40% of Sterling & Wilson Solar, the solar EPC joint venture it runs with urban family Khurshed Yazdi Daruvala, to a branch of Reliance Industries for Rs 2,845 crore.
While for the SP group led by Shapoorji Pallonji Mistry, this is the second asset sale in a month after the sale of Eureka Forbes for Rs 4,400 crore to US private equity Advent International, for Reliance it this is the second solar acquisition in a day.
Earlier today, RIL announced that it had acquired all of the shares in Norwegian solar panel maker REC Solar Holdings for $ 771 million from the China National Bluestar Group Company. The two agreements are part of the latest AGM of RIL President Mukesh Ambani, who announced the investment of Rs 75,000 crore in the green energy sector by 2030, when he plans to have 100 gw of solar energy and also to become a global player in the renewable energy industry.
Read also | Reliance buys REC Solar for over 5,791 crore rupees
Reliance is completing the deal through its wholly-owned subsidiary Reliance New Energy Solar (RNESL), which “will acquire 40% (post-preferential allocation to RIL) in Sterling & Wilson Solar (SWSL) through a combination of primary investments, secondary purchases and an open offer, ”the companies said in a joint statement, without quantifying the value of the transaction.
He added that RIL will be able to appoint two members of the board of directors. Explaining the structure of the deal, a Reliance official told PTI that prior to the deal SWSL held 16.04 crore of shares.
As part of the agreement, RNESL will first inject Rs 1,100 crore into SWSL for a capital of 15.46% through a preferential issue of shares totaling 2.93 crore, thereby increasing the share of the SWSL capital at 18.97 crore, of which Reliance will buy 40 per cent through the sale of 1.84 crore of shares or 9.7% of post-preferential shares by promoters Shapoorji Pallonji & Company and Daruvalas at a price of Rs 375 per share, which is a steep discount from Friday’s closing price of Rs 434.80.
In the last step to meet Sebi standards, RNESL will launch a public offer to acquire up to 4.91 crore of shares, or 25.9% of the shares released after the preferential issue. “Once the complete structure is completed, Reliance will hold 40% of the post-preferential share capital or 7.59 crore of shares at a price of Rs 375 per share, aggregating the total investment, including a full subscription of the open offer at Rs 2,845 crore, ”the official said.
Reliance New Energy Solar is buying shares of Shapoorji Pallonji & Company, Khurshed Daruvala (the company’s founding president) and Sterling & Wilson Solar, according to the statements. Currently in Sterling & Wilson Solar, the Mistry owns 50.6%, the Daruvala 17.9% and the rest is publicly owned.
Reliance has beaten high growth private equity funds such as Brookfield, Canadian pension fund CPPIB and also the largest domestic private sector power producer Adani Power by bagging Sterling & Wilson Solar, which is one of the largest providers of solar EPC solutions in the world. The agreement allows the SP group to reduce debt which, at the group level, is around Rs 20,000 crore.
For the SP group, laden with debt and led by Shapoorji Pallonji Mistry, this is the second asset sale in a month after the 4,400 crore deal for Eureka Forbes it signed with private equity American Advent International. The sale will help the 156-year-old SP Group, which owns 18.34% of the Tata Group, to reduce its debt by over Rs 20,000 and focus more on its flagship construction and engineering business under Afcons.
Reliance announced earlier today that it will use REC technology to manufacture metallic silicon and solar panels at its Giga factory in Jamnagar, Gujarat, with an initial annual capacity of 4gw, eventually reaching 10gw. At Reliance’s AGM in June, Ambani announced spending of Rs 60,000 crore for the creation of clean energy manufacturing capacity and Rs 15,000 crore for the value chain and technology.
The purchase of the Norwegian solar panel maker is part of $ 2 billion Ambani set aside for acquisitions to build clean energy capacity. Launched as a solar EPC division in 2011, Sterling & Wilson Solar was split from April 2017 and went public with an initial public offering of Rs 3,125 crore by issuing shares at a price of Rs 780 per share in August 2019.
The company has a portfolio of 257 solar power projects with a total capacity of 11.4 gw in all geographies and is one of the largest solar EPC providers in the world. It is present in 26 countries, with the Middle East and Australia contributing a significant portion of turnover. As of August 14, 2021, its unfulfilled backlog stood at Rs 8,731 crore, which were executable over the next 12 to 15 month period.
SWSL has so far executed over 11 GW of turnkey solar projects worldwide. The company has a team of 3,000 people and a presence in 24 countries, offering a full range of turnkey solar power solutions, including design, procurement, construction, project management, operations and management. RIL President Mukesh Ambani said SWSL, with its engineering talents, deep domain knowledge, global presence and experience in executing some of the most complex projects in the world, will become an important part of our solar value chain.
This will allow us to deliver our complete end-to-end ecosystem leading to profitable green energy for consumers. Shapoor Mistry, President of Shapoorji Pallonji & Co., said this partnership is beneficial for all stakeholders and will go a long way in making the country a leading green energy power. Khurshed Daruvala, President of SWSL, said SWSL is a global leader in providing turnkey solutions in the energy value chain. Daruvala will continue to serve as chairman of the board and lead SWSL’s next phase of growth, the statement said.
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