Sembcorp Industries 'sets stage for spin-off of India energy ops'
IPO could raise as much as US$500m to US$600m, say market watchers
Singapore
SEMBCORP Industries has set out to consolidate its thermal and renewable energy unit in India under a single entity, a move seen as laying the groundwork for the listed group to spin off its businesses there.
The listed group said before Monday's trading hours that three transfers of shareholding interests in these businesses have taken place as part of the reorganisation of its India energy operations.
First, its wholly owned subsidiary, Sembcorp Utilities (SCU) has transferred its 88 per cent stake in Sembcorp Gayatri Power (SGPL) to Thermal Powertech Corporation India (TPCIL). TPCIL has also been renamed Sembcorp Energy India Limited (SEIL).
Second, its partner, Gayatri Energy Ventures (GEVPL) has transferred its 12 per cent stake in SGPL to SEIL.
Third, SCU has transferred its 71.6 per cent stake in Sembcorp Green Infra (SGI) to SEIL.
The consideration for the transfers was settled in SEIL shares, issued as fresh equity to SCU and GEVPL, taking into account their respective shareholdings in SGPL and SGI.
Sembcorp Industries also said that the proposed buyout of SGI remains on track for completion in this quarter. On Aug 31, 2017 the group announced that it had entered into a deal to acquire the remaining 28 per cent stake in SGI from IDFC Private Equity Fund III.
Once these transfers and transactions are completed, the group's thermal and renewable energy businesses will be consolidated under SEIL. Sembcorp Industries will hold an effective stake of 93.7 per cent in SEIL, while GEVPL will hold the remaining 6.3 per cent interest.
The consolidation of these businesses under a single entity "sounds like preparation for an initial public offering (IPO)", UOB Kay Hian noted on Monday.
Citing media reports in India, the brokerage said the IPO - said to be planned for this year - could raise as much as US$500 million to US$600 million. Investment banks Credit Suisse and Axis Capital are reported as managing the sales of the IPO shares.
"We reckon the proceeds will likely be used to pare down debts and reduce interest expense (that) makes up 25 per cent of the power plants' annual expense," UOB Kay Hian said in its research note.
The brokerage maintained its buy rating on Sembcorp Industries with target price unchanged at S$3.87. Sembcorp Industries shares closed at S$3.30 on Monday, up eight cents.
