Anil Ambani-promoted Reliance Infrastructure (R-Infra) is likely to postpone its demerger plan to the next financial year. The company has moved the Bombay High Court, which is hearing its scheme of arrangement, seeking to change the effective date of the plan to April 1, 2017 from April 1,2016.
Accordingly, the scheme when approved would take effect in the financial year 2017-18. The court is likely to take up the matter early next week. The Rs 6,282-crore restructuring scheme by which it plans to hive off the power generation and distribution facilities to a separate entity called Reliance Electric Generation and Supply (REGSL), was initiated a year ago as part of its deleveraging efforts.
In January, the court had asked R-Infra to obtain a written consent from all the lenders, both secured and unsecured, and the deal also required the consent of Maharashtra Electricity Regulatory Commission (MERC). In a plea seeking the change dated March 15, the company told the court it would not be able to receive these consents by May 30, the regulatory deadline for filing audited FY17 results by listed companies.
"Hence, it may not be possible to make the Scheme effective prior to 30th May, 2017. As a result, the audited financial results of the Applicant Company for the financial year 2016-17 will not be able to take into account the effect of the scheme in its books of accounts for the financial year 2016-l7. This may cause undue hardship to the Applicant Company for publishing of the annual financial results to the Stock Exchanges within 60days from the close of the financial year 2016-17," the company said.
Company officials did not offer any further comment. The company plea added that it be allowed to "change the Appointed Date of the Scheme from "1st April,2016 to "1st April,2017" so as to enable it "to adequately provide effect to the Scheme in the next financial year i.e.2017-18."
The application specifically mentioned foreign currency borrowings from Credit Agricole and Mizuho Bank, from which also written consents were required by the court. In December, Life Insurance Corporation of India (LIC), which had 11.93% stake and a debenture exposure of Rs 2,000 crore in R-Infra, had set certain conditions for its consent to the merger.
The company agreed to comply with all these conditions. According to the statements by the company, the demerger was aimed at increasing shareholders' value by leveraging diversified investment opportunities, attribution of appropriate risk and valuation to different businesses based on their respective risk-return profile and cash flows; pooling of resources at the company level and allocation of capital to each of the businesses based on risk-return; and simplified and transparent businesses and achieving operational synergies.
R-Infra has three business segments - electrical energy, EPC(engineering, procurement, construction) and contracts, and infrastructure. Under the first one, engaged in generation, transmission, and distribution of electricity, it has a 500 Mw thermal power station at Dahanu, near Mumbai; a 220 Mw power plant at Samalkot (Andhra), a 48 Mw power plant at Mormugao (Goa)and a 7.6 Mw wind energy farm at Chitradurga (Karnataka).
Of the Rs 6,282 crore consideration, Rs 5,580 crore is for the Mumbai division, while the Samalkot and Goa facilities are valued at Rs 560 crore and Rs 110 crore, respectively. The windmill was worth Rs 40 crore.
The company had signed a non-binding term sheet and entered exclusive talks with the Canadian pension fund PSP on the sale of 49% of its Mumbai power generation, transmission and distribution business, according to an exchange filing in 2015.
Montreal-based PSP has C$112 billion ($84 billion) in assets under management and oversees the retirements savings of public servants, the Canadian Forces, and the Royal Canadian Mounted Police. The EPC and contracts segment is engaged in the business of construction, erection, commissioning and contracting. The infrastructure segment develops, operates and maintains toll roads, metro rail transit systems and airports.
In December 2015, the company acquired management control in Pipavav Defence. On March 16, the company told exchanges that the board had cleared a plan to raise funds through Qualified Institutional placement.
R-infra shares ended Wednesday's trade with a loss of 2.52% at 560.95 apiece.
