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November 19, 2010

Moser Baer's Power Foray

Economic Times has published a feature on the Moser Baer Group's foray into the power generation business. (The group recently raised PE funding from Blackstone for one of the ventures.)
It’s as big a reinvention the Puris have undertaken as any. Over the next five years, the Puris plan to invest Rs 34,000 crore -- about 16 times the current revenues of Moser Baer India -- to set up 5,000 MW of power capacity across three mediums: thermal, hydro and solar. And they are doing all this outside the flagship company.

...For the Rs.34,000 crore investment required, the Puris are looking at a debt-equity ratio of 75:25. However, the banks they are talking to are asking for 30% equity, as Moser Baer is new to the power business. At 30%, the equity component is about Rs 10,000 crore. So far, it has got Rs 1,350 crore from Blackstone. The Puri family has brought in Rs 700-800 crore, most of it providentially realised from the sale of personal land just before Lehman Brothers collapsed, taking the real estate market with it....The remaining Rs 8,000-odd crore is expected to come by diluting equity, both to the public and to private equity. Moser Baer Projects has also tied up a loan of Rs 2,000 crore each from Axis Bank and SBI Caps.

...The Puris have taken a clean approach to structuring the power business. It’s separate from Moser Baer India, the listed entity that is into digital storage and PV cells. Says Ratul Puri: “Development businesses are very different from manufacturing. The risk profiles are different, as are the mindsets and approaches required.” So, for the power business, there’s a holding company, Moser Baer Projects, in which the Puris and Blackstone are shareholders. Moser Baer Projects has three subsidiaries, one for each power business; mining is a division of the holding company.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at