Jindal Steel & Power Ltd., seeking to cut debt after eight straight quarters of losses, is in talks with companies including billionaire Gautam Adani’s Adani Power Ltd. about selling a 2,400-megawatt Indian electricity plant, people with knowledge of the matter said.

The New Delhi-based company has been in discussions about selling the plant to Adani Power as lenders led by State Bank of India pressure the company to make divestments, according to the people, who asked not to be identified because the information is private. Jindal Steel is seeking to value the asset, located in Tamnar in the central Indian state of Chhattisgarh, at more than 100 billion rupees ($1.5 billion), the people said.

No final agreements have been reached with Adani Power, and there’s no certainty Jindal Steel will proceed with a sale, according to the people. The company has also reached out to other potential buyers for the plant, the people said.

Jindal Steel, controlled by Naveen Jindal, has the second-highest borrowing level among Indian steelmakers, according to data compiled by Bloomberg. The company, which had 463 billion rupees of net debt as of December, started a leverage reduction plan in May after agreeing to sell a 1,000-megawatt power plant in central India to JSW Energy Ltd.

Jindal Steel needs about 20 billion rupees to buy coal, which the company’s lenders have agreed to fund only after it makes progress on asset sales, the people said. Bankers have told Jindal Steel they may need to introduce new equity investors if the company isn’t able to reduce its debt, the people said.

A sale of the Chhattisgarh power plant “is not on the cards,” Ravi Uppal, the chief executive officer of Jindal Steel, said by phone. “There is nothing like that at the moment,” he said in response to Bloomberg queries.

Representatives for Jindal Steel didn’t immediately respond to e-mails and phone calls seeking further comment. A representative for SBI didn’t immediately respond to e-mailed questions, while a representative for Adani Power said he couldn’t immediately comment.

Jindal Steel shares rose 6.2 percent to close at 91.30 rupees, the highest since January 2016, while the benchmark S&P BSE Sensex Index gained 0.1 percent.

Jindal Steel’s Uppal said on a December analyst call the company is having further dialogue on restructuring, though talks are at an exploratory stage. The company has restructured 70 billion rupees of project loans under the Reserve Bank of India’s so-called “5:25 scheme,” K. Rajagopal, the group chief financial officer at the time, said in September.

The central bank program allows for “flexible structuring” of debt owed by infrastructure and industrial companies. It lets banks lend for as long as 25 years, and borrowings can be refinanced every five to seven years.

Adani Power, which has a market value of $1.9 billion, bought Lanco Infratech Ltd.’s 1,200-megawatt power plant in southern India in 2015 for 63 billion rupees.

Source:
courtesy of BLOOMBERG

by George Smith Alexander and Anto Antony

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