Exclusive | Brookfield buys Emami Group’s solar business; deal part of conglomerate’s non-core asset sale strategy

When contacted, Emami Group confirmed the transaction. Emami Power is not linked directly to the listed flagship firm Emami Ltd and is a unit belonging to the promoter group.

Canadian investment giant Brookfield Asset Management has sealed a deal to buy out Emami Power, the solar power business of Kolkata-based diversified conglomerate Emami Group.

When contacted, Emami Group confirmed the transaction.

“As part of our divestment plan of non-core business assets, we are happy that we could conclude the deal with Brookfield Asset Management to sell our solar power business – Emami Power,” said Harsha V Agarwal, director, Emami Group.

Emami Power is not linked directly to the listed flagship firm Emami Ltd and is a unit belonging to the promoter group.

“The Emami group is looking to speedily pare its debt burden at the group level and become debt free. This transaction is a part of their ongoing non-core asset monetisation exercise,” said a person familiar with the transaction.

“Brookfield is very bullish on the solar power segment and is looking to build a platform or portfolio of solar and alternate power assets in India. The solar power assets they have acquired from Emami Group are operational and functional,” said a second person with knowledge of the deal.

Moneycontrol could not independently verify the deal valuation.

Both the persons spoke to Moneycontrol on the condition of anonymity.

Moneycontrol is awaiting an email response from Brookfield Asset Management and will update this article as soon as we hear from the firm.

Yes Securities was the financial advisor to the Emami Group for the transaction while law firm Khaitan & Co was the legal advisor, according to company officials. Moneycontrol is awaiting an email response from Khaitan & Co and could not immediately contact Yes Securities.

According to the Emami Power website, the company had already set up 11 MWp ( mega watt peak) solar power projects in Karnataka, 10 MWp solar power projects in Gujarat, a 3.3 MWp solar power project in Tamil Nadu and a 22.5 MWp solar power project in Uttarakhand.

Debt issues engulfed Emami Group after the promoters pledged their shares in multiple entities, including Emami Ltd, to raise funds to invest into newer businesses like cement, paper and real estate. Currently, the promoter group owns about 52.7 percent stake in Emami Ltd, reduced from 62.74 percent as on March 31, 2019. Of the total promoter holding, 71.58 percent was pledged as on December 31, 2019.

In February 2019, the promoters offloaded 10 percent stake in Emami Ltd for ₹1,600 crore. In June, in a bid to reduce the debt burden again, the promoters sold an additional 10 percent stake in the company for Rs 1,230 crore. The debt then was Rs 3,300 crore, which was brought down to about Rs 2,200 crore.

More debt reduction deals were struck later. In February 2020, the Emami Group announced the sale of its cement business to Nuvoco Vistas Corp Ltd, a Nirma group company, for an enterprise value of Rs 5,500 crore. Moneycontrol was the first to report the Emami Group’s plans to divest their cement assets on June 25, 2019.

Rating agency CRISIL has highlighted the impact of pledged promoter stake in a report on Emami Ltd dated March 31, 2020. “CRISIL also notes the increase in pledge of promoter stake over 80 percent due to debt at group level. The increasing pledge of the stake has impacted financial flexibility of the company,” the report said.

The report noted that the company management is in the process of liquidating certain business segments to reduce the promoter level debt in the near term to reduce the pledge to below 20 percent. “ The timely reduction of the pledge will remain a key monitorable,” it added.

Emami Group, promoted by RS Agarwal and RS Goenka, has diverse business interests, including FMCG, newsprint paper, writing instruments, edible oil and cultivation, biodiesel, hospitals, real estate, retail, cement, and contemporary art.

A CLOSER LOOK AT BROOKFIELD

Brookfield Asset Management has over $515 billion of assets under management across several sectors worldwide . Last year, it emerged as the largest private capital investor in India as it pumped in nearly $6.28 billion across private equity, infrastructure, and real estate sectors. Its $3.6 billion acquisition of the telecom infrastructure assets of Reliance Jio Infocomm Ltd was the largest transaction ever by a private equity investor in India.

Brookfield also invested more than $1.87 billion in RIL’s gas pipeline assets, East West Pipeline Ltd.

According to its website, in India, Brookfield owns and operate a portfolio of infrastructure and real estate assets, including 22 million square feet of office properties. It also own seven toll roads totalling more than 600 km of roadway, solar and wind assets, a construction business and real estate management services.

Source: moneycontrol