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Mahindra’s renewables biz set to launch Rs 3,500-crore InvIT

Mahindra Susten, the renewables energy platform of the Mahindra Group, has started the process to launch an infrastructure investment trust (InvIT). Kotak Mahindra, Axis and Avendus Capital have been mandated to run the process, said people in the know.

Mahindra Susten’s businesses comprise the group’s renewable engineering, procurement and construction (EPC) unit (with more than 4 GW of capacity constructed) as well as an independent power production (IPP) unit with around 1.54 GW of operational solar plants.

The InvIT will comprise the 1.54 GW IPP business and is likely to be valued at ₹3,000-3,500 crore, said the people. The investor is likely to get a 25% stake in the InvIT that will be privately held, they said.

An email sent to a Mahindra Susten spokesperson did not elicit any response till press time on Wednesday.

Canadian fund Ontario Teachers’ Pension Plan Board already owns an about 30% stake in Mahindra Susten.

Ontario Teachers had acquired the minority stake in Mahindra Susten in September 2022 for ₹2,371 crore. Prior to that, in 2021, talks with Brookfield, another Canadian asset manager, for a ₹6,000 crore sale of the business had collapsed.

The IPP solar portfolio, spread over five states, is backed by long-term power purchase agreements – about 75% with central government entities and the remaining with distribution companies backed by state governments.

Mahindra Susten through its third-party Utility Scale Solar business undertakes turnkey EPC projects – from solar panel installation, site survey and feasibility report to the lifetime maintenance of the plants.

The company had posted a loss of ₹49 lakh on revenue of ₹595 crore in FY22. The year earlier, it had reported a profit of ₹6 crore on revenue of ₹₹952 crore.

The A+/ stable rating reflects Mahindra Susten’s moderate operational and strategic linkages with its parent, Mahindra & Mahindra, said an India Rating report last year.

M&M has been supporting the company through periodic equity infusions (₹136 crore in FY20 and ₹150 crore in FY19). It did not infuse any equity in FY21-FY22, but extended unsecured loans of ₹575 crore. M&M shall contribute the required equity contribution for prospective projects, if required, on a need basis, said the report.

The company had external debt of ₹965 crore at end-FY22, excluding the ₹575 crore loan from M&M. The debt servicing is unlikely to pose a challenge, as the project-specific debt is linked to the cash flows of power projects, said the report.

InvITs are getting traction as major investment alternatives for global investors who are looking for steady returns through stable and long-term cash flows.

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