Indian renewable power developers queue for initial public offerings

Over the past week two of the biggest developers in India have announced plans to list on the stock market in order to raise equity capital.

Acme solar, a Haryana-based company, has filed preliminary papers to raise INR 22 billion ($336 million) with the Securities Exchange Board of India (SEBI). Another firm, Sembcorp, which is a Singapore-based power producer, said that it may either list in India or elsewhere.

Previously in September 2016, Azure Power was the first Indian power producer to be listed on the NYSE and, anticipating this trend, Bridge to India assumes that another leading power producer from India, ReNew Power, will soon launch an IPO in the coming year.

The analysts are also quite confident that Adani, Greenko and Tata Power Renewable are also potential candidates for an IPO.

Most of these developers are proactively looking to raise capital investment for new projects to sustain business growth, and to keep up with the Indian soaring solar sector, which has increased immensely in the past two years.

According to Bridge to India, as of September a total of nine private developers have amassed solar portfolios with a minimum capacity of 500 MW: Adani (2,038 MW), Acme (1,713 MW), Renew (1,659 MW), Greenko (1,407 MW), Tata Power Renewable (1,382 MW), Azure Power (1,102 MW), Essel Infra (710 MW), Engie (694 MW) and Hero Future Energies (540 MW).

However, financial investors are always on the lookout for exits, and that is creating urgency in the primary and secondary equity market sectors.

The Indian consultancy firm further analyzed the poor performance of the initial infrastructure investment trust (InvIT), and similarly in mergers and acquisitions (M&A) routes that have spooked the market and do not appear encouraging for project developers.

Investors are aware of key risks in the sector – slowing pipeline and falling tariffs, poor DISCOM credit, uncertainty about grid availability, plant performance etc – that have negatively affected return. For example, Reliance, Jaipraksh and Adani have suffered losses with thermal power IPOs. In relation to these issues, Azure Power itself has been trading at more than 10% below its issue price.

Overall, lots of portfolios across markets are available for sale or IPOs, but deals are held up because of a mismatch in pricing expectations. In conclusion, Bridge to India has identified that investors are driving hard bargains, and deals are likely to be made only with credible developers and at the right price levels.