Taqa $1.6bn deal to buy India power plants fetched less than analyst estimates

Shares of Jaiprakash Power Ventures, which is selling the hydroelectric plants, fell 16 per cent.

Jaiprakash Power Ventures shares were set for the biggest loss in seven months on concern a deal to sell two hydropower plants to Abu Dhabi National Energy Co, bettwer known as Taqa, fetched less than analysts had estimated.

The stock fell 16 per cent, the most since July 30, to 13.95 rupees in Mumbai. It slumped 18 per cent earlier, making it the worst performer on the S&P BSE 500 index. The benchmark S&P BSE Sensex was little changed.

Abu Dhabi’s state-controlled utility and partners including a Canadian institutional investor and Indian infrastructure finance fund IDFC agreed to pay $1.6 billion in cash and assume debt to buy two hydroelectric plants with a capacity of 1,300 megawatts from Noida-based Jaiprakash. That may be less than analysts had estimated, according to analysts at JPMorgan Chase & Co and ICICIdirect.com.

“The deal was expected to fetch about 120 billion rupees (Dh7.1bn),” ICICIdirect’s Chirag Shah said by phone. “It’s still not clear what impact that will have on its debt.”

JPMorgan analysts Sumit Kishore, Deepika Mundra and Boris Kan cut the stock to neutral from overweight and lowered the 12-month price target by 24 per cent to 19 rupees. They advised investors to “switch to” Tata Power Company.

Jaiprakash Power, a unit of Jaiprakash Associates, is trying to reduce debt that stood at 168 billion rupees as of Sept. 30, versus 54 billion rupees two and a half years earlier, according to data compiled by Bloomberg.

Jaiprakash Associates fell 4.2 per cent, the most in a month, and was among the 10 biggest decliners on the MSCI Emerging Markets Index.

“Although the steps taken by JPA to deleverage are positive, we believe that the asset sale would meaningfully impact Jaiprakash Associates’s future growth prospects,” Goldman Sachs analysts Pulkit Patni and Mohit Soni in Mumbai wrote in a note.