According to the Economic Times (ET) of India, Kohlberg Kravis & Roberts (KKR) is looking to acquire an additional 11% stake in Gautam Thapar-controlled Avantha Power and Infrastructure Limited (APIL).
The move will cost KKR an estimated $75 million. This will value the firm at $682 million. KKR had invested $50 million (Rs.217 Cr) in last October for 9% stake, valuing the firm at $555 million, said ET.
US-based Kohlberg Kravis and Roberts is one of the leading global private equity firms. According to ET, a senior official for the Indian firm said the company is in advanced discussions with KKR and expects to conclude the deal by June-end or early next month.
However, Sanjay Nayar, country head and CEO of KKR India, also declined to comment on the proposed investment, reported ET.
Avantha Power, which was planning to mop up around 1,100 crore earlier this year through an initial public offer, had shelved this plan due to bearish market conditions. Analysts believe foreign institutional investors are not interested in the Indian power sector, which is facing the impact of coal linkage facilities and a sharp drop in the merchant power rate, said ET.
Sources close to the deal told ET that KKR will invest $75 million at the same price it had done in October 2010. The sources revealed that given the current sentiments in the power sector, the company management has agreed to issue fresh shares at around 34 per share to KKR which had invested $50 million October 2010.
KKR’s investment of $75 million, equivalent to 340 crore, which is nearly one-third of the size of proposed initial public offer, would suffice to meet the fund requirements in the near term, the second person said.
KKR, which has so far put in a little over $1 billion in previous transactions that involved Aricent, a niche technology services company it acquired in 2006, CafA© Coffee Day and Dalmia Cement (Bharat) and Max Group, has a long-term investment horizon, another source familiar with the development told ET.
APIL, with an existing thermal capacity of 191 mw, is implementing generating capacity of 2,400 mw. Of this, the company is implementing two thermal power plants of 600 mw each in Chhattisgarh and Madhya Pradesh, entailing a capital expenditure of 5,782 crore in the first phase, which will be operational by 2012 end.