ReNew seeks financing for its solar equipment business

New Delhi|Mumbai: Global Renewable Energy Plc is exploring multiple options to raise funds for its solar equipment manufacturing business, including bringing in investors. The aim would be to take the company public in the next year or two, to cash in on the wave of investor optimism for energy startups in India, according to people with knowledge of the matter.

The company is open to incorporating private equity or pension funds in its equipment business before listing its wholly-owned subsidiary, Renew the powerIn India, they said.

Asset recycling strategy
The people cited above said the listing would provide access to cheap capital, which could then be used to develop new projects and reduce debt.

Nasdaq-listed ReNew operates two solar module manufacturing plants – a 4 GW plant in Jaipur and a 2.4 GW plant in Dholera, Gujarat. Another 2.5 GW cell production unit in Dholera is scheduled to come online before the end of the year.

“Solar manufacturing is not ReNew’s core business. It is part of its asset recycling strategy,” said a person familiar with the development. “If ReNew sells a minority stake to private equity investors, they will look to exit at some point, at which point they might consider an IPO (initial public offering).”

According to the sources, a fundraising process is likely to be arranged in the coming months to help set a benchmark for the proposed listing valuation. The proceeds will be used to pay down some of the debt. ReNew Power had net debt of Rs 57,267 crore at the end of June, according to a filing on the company’s website. ReNew Energy, backed by the Canada Pension Plan Investment Board, has appointed Standard Chartered Bank to lead the process, two of the people cited above said.

According to a presentation the investment banker made to potential investors last week, demand for Solar energy manufacturing will outstrip supply in the Indian market.

StanChart declined to comment. ReNew Energy did not respond to our queries.

Markets in green

Strong ratings enjoyed by renewable energy companies In India, ReNew has been encouraged to monetize its solar equipment manufacturing business, the people said.

Last week, Premier Energies, which has an annual production capacity of 2 GW of solar cells and 3.36 GW of solar modules, listed on Indian bourses. Its shares have since gained 31% while market capitalisation has reached Rs 49.4 billion ($5.8 billion). More such companies are considering listing on Indian markets.

Meanwhile, cleantech stocks have taken a hit on international markets lately. ReNew shares are down 22% this year on the Nasdaq. It currently has a market capitalization of $2.2 billion.

Building more

ReNew’s equipment business is still stabilising, unlike some of its competitors, which have been operational for some time.

The company, however, has the advantage of a captive customer base as a significant portion of its output will likely be used domestically, shielding it from market forces to that extent, people familiar with the matter said.

Tapping into the private or public market for the equipment business is part of ReNew’s stated policy of “asset recycling,” under which it intends to sell its operating businesses and use the capital to build new ones.

Given its ability to build solar plants, company management believes it can add more value by installing new plants than by operating them over their entire economic life.

Unlike its competitors, which have been selling operating assets in their entirety, ReNew is also open to joint ventures or selling partial stakes. It has raised $500 million in equity value from asset sales over the past two to three years.

India plans to tender 50 GW of renewable energy capacity every year for the next five years to meet the target of 500 GW by 2030.