India Inc is selling its prized possessions
What do Tata Group, Reliance ADAG, Bharti Airtel, Jaypee Group, DLF, and several other Indian businesses have in common today? Departing from the long-standing Indian tradition of keeping assets close to their chest even in dire circumstances, these conglomerates are today, selling their prized possessions.
Tata Group selling its entire UK steel business, Reliance Infra selling sake in Mumbai electricity and cement business, Jaypee selling hydro plants and all but one cement plant, are some recent examples.
According to a report by Centrum, asset sale in corporate India was not a common occurrence in the past. But today, the research says, the scenario is changing.
In the last ten years, most companies undertook major expansions when India was riding the high growth tide but as things got difficult with a global and domestic slowdown, the trend was set to change.
Companies quickly expanded, even across sectors when the government was pushing investments in infrastructure and wanted the private sector to build big projects, the report says. Even getting loans and clearances for big ticket projects then, was relatively easy.
But it now seems, "companies ended up biting more than they could chew,” the report says.
The turn of events in the global economy have led to a drastic drop in the profitability of some of these projects. While the companies had readily received the initial financial support, going ahead, fulfilling incremental capital requirements became difficult.
The outcome was "stretched financials leading to higher debt in corporate balance sheets and defaults in some cases," the report said.
“Most of these assets are quite productive... and once they go from financially weaker hands to relatively stronger hands, it is quite likely that productivity from such assets will multiply manifold,” Centrum said.
These corporates were left with no choice but to consider lightening their portfolios.
Here are some of the asset sale deals:
September 2015 - Two 1,391 MW hydro power plants sold to JSW Energy for Rs 9,200 crore.
2015 - Cement business except Karnataka facility to be sold to UltraTech Cement for Rs 15,900 crore.
April 2016 - Headquarters, commercial space, Noida township land sold to Axis Bank for Rs 2,700.
Anil Dhirubhai Ambani Group (ADAG):
November 2015 - 49% stake in Mumbai electricity business sold to Canada's Public Sector Pension Investment Board (PSP Investments) Rs 3,500 crore.
February 2016 - Cement subsidiary to be sold to Birla Corp for Rs 4,800.
December 2015 - 150 residential Navi Mumbai flats sold for Rs 330 crore.
May 2016: 30% energy arm stake sold to Malaysian firm Tenaga Nasional Berhad for Rs 2,000 crore.
March 2016: 51% stake in 99-km highway project in Karnataka sold to joint venture partners for Rs 1,078 crore.
February 2013 – 74% stake in Jadcherla Expressway sold to SBI Macquarie
June 2015,cinema exhibition business DT Cinema sold to PVR for Rs 500 crore.
January 2015: German subsidiary Senvion sold to Centerbridge Partners for Rs 7,200 crore.
February 2015: 2.91% equity in Infratel sold for Rs 1,925 crore
October 2015: 8,300 mobile towers in Africa sold for Rs 11,000 crore.
Some upcoming deals
Jaypee, ADAG Group, DLF, Airtel will be offloading more assets to cut debt and setlle dues.
Jaiprakash Power Ventures in talks to sell 500 MW Bina thermal power plant to JSW Energy.
Jaiprakash Associates is planning to sell 1000 acres more in Noida to settle bank dues of Rs 10,000 crore.
ADAG Group: In February 2016, Reliance Infrastructure agreed to sell its cement assets to Birla Corp for Rs 4,800 crore.
Reliance Infrastructure wants to sell its entire portfolio of road projects valued at about Rs 9,000 crore.
Is looking for intereste dparties to buy out 40% stake of its rental assets arm, valued at about $2 billion.
Process of offloading 5% stake in its tower arm initiated. Deal might be worth Rs 3,750 crore.