l Equity Research l India l Banks l 11 March 2014 India financials More breathing space for large, overleveraged groups for now We met key lenders to gauge the impact and the quantum of assets sold by stressed groups to deleverage. From our discussions, we conclude that most large stressed groups that investors are concerned about have raised enough liquidity to service their debt obligations for the next 9-12 months, either by selling assets or getting loans refinanced. Banks will continue to treat these as standard loans. Given that large groups have managed to raise liquidity for the next few quarters, NPLs and restructured loans will remain confined to the small to mid-size corporates. What happens beyond 9-12 months to the large groups depends on how investment demand picks up post elections. If we get a stable, pro-reform government that is willing to end the policy paralysis, most of these accounts could get into better shape. If policy paralysis continues, some of these loans could slip. Corporates have sold assets worth 13% of debt in the past two years and assets worth 12% of debt are on the block. Their debt accounts for 13.9% of system loans. Factoring in all sales, the leverage of these groups still remains high at 8.9x and the proportion of their debt to system loans drops, but still remains high at 11.7% against 13.9% earlier. Remain cautious. While the liquidity infusion comes as a relief, it is only a short-term solution. ICICI Bank, and HDFC Bank remain our key picks. We maintain UP on SBI, BoI. Within PSU banks, we prefer BoB and PNB relatively. Click for The Scoop Assets sold form c.13% of total debt, many more on the block Asset sales gathering momentum but leverage remains high Assets sold in the past 12-18 months form c.13% of the total Refinancing has helped in a big way: We find that refinancing has contributed a higher proportion than asset sales to the fresh liquidity created by these groups. Media articles have pointed to refinancing and dollarization of debts of large groups – Essar, Jaypee, and Aircel. (INR bn) 400 Mahrukh Adajania Nikhil Rungta [email protected] +91 22 4205 5903 [email protected] +91 22 4205 5933 10 360 7 8 7 5 Post sale 124 200 5 - FY12 FY13 11MFY14 Asset on block Debt/EBITD A continues to remain high 67% of assets sold are from power and oil & gas sectors 5.2% Click here to get The Scoop, an audiovisual summary of the report. 602 11 10 7 The bottom line policy reforms are a must and the pace of asset sales needs to accelerate. We need more deals like the benchmark sale of two power plants of the Jaypee group to Abu Dhabi-based Taqa. Debt / EBIDTA (Post-sale) 15 12 11 600 3.5% 2.5% Refinancing and asset sales are short-term solutions Refinancing and asset sales have taken care of near-term debt obligations. Nevertheless, these groups’ leverage still remains high. For a long-term solution, the economic growth needs to , Debt / EBIDTA (Pre-sale) (x) outstanding debt of these groups. Twelve business groups have sold assets worth more than INR 549bn. In addition, 16 large groups with total debt of INR 5.2tn have put assets worth INR 602bn on the block. Assets sold 800 2.3% 0.2% 13.0% 5.5% 6.1% 20.4% 7.0% 26.5% 1.8% 6.0% Power (Gas) Power (Hydro) Power (Wind) Mine Oil & gas Cement Real estate Roads Hotels Airport Telecom Port Others Source: RBI, Standard Chartered Research Did you know… All large groups have raised at least INR 25-30bn of fresh liquidity to service their debt for 3-4 quarters Important disclosures can be found in the Disclosures Appendix All rights reserved. Standard Chartered Bank 2014 http://research.standardchartered.com Equity Research l India financials Asset sales faster than ever before but still low relative to total debt According to a senior banker we met, “All large overleveraged groups, except one, have raised at least INR 25-30bn of liquidity through a combination of asset sales and refinancing to meet their short term debt obligations. Longer term, the new government, irrespective of who comes to power, will have to focus on policy reforms to revive investment demand”. Summary of key takeaways from our discussions with large corporate lenders: Banks have been putting pressure on large corporates to deleverage through asset sales. While there are buyers for some assets such as operational road projects, there is little demand for assets belonging to the telecom and thermal power sectors that remain stressed. With pressure from banks, borrowers have brought down their inflated expectations from asset sales. However, the buyers too have started bargaining hard. Given that sale of assets is time consuming, banks have in the interim done needbased refinancing for some of these groups so that they can take care of their daily funding requirements and service debt obligations. We gather that banks will use new RBI guidelines on early resolution of debt mainly to resolve stress in the mid to small corporate loans not the large overleveraged groups. Banks say that they have been using a similar mechanism for the large overleveraged groups already, even before these guidelines came into force. Large groups have sold assets worth 12.7% of debt; leverage still remains uncomfortably high: Indian corporates have sold assets worth INR 549bn over the past 12-18 months, amounting to 12.7% of their debt. Most of these sales have been to other companies (domestic and international) in the same sector. A few of them have sold stakes to private equity players. Assets sales have brought about a meaningful reduction in debt of the power business of the Jaypee group. However, for most other companies, leverage will still remain high after sale of assets. The collective post sale debt to EBITDA for the groups that sold assets remains high at 8.8% compared with 10.1% pre-sale. Figure 1: 67% of assets sold belong to power and oil 3.5% 2.5% 2.3% Power (Gas) 0.2% 13.0% Power (Hydro) 5.2% Figure 2: 97% of the total assets sold has been to players in the same sector 2.8% Power (Wind) Mine 5.5% Oil & gas 6.1% 20.4% Sold to companies in same sector Cement Real estate Sold to PE players Roads 7.0% Hotels 1.8% 6.0% 26.5% Airport Telecom Port Others Source: Company, BSE India, Live Mint, The Economic times, Business Standard, NDTV, Standard Chartered Research 11 March 2014 97.2% Source: Company, BSE India, Live Mint, The Economic times, Business Standard, NDTV, Standard Chartered Research 2 Equity Research l India financials Two landmark deals, but more needed: Two recent deals are noteworthy and chunky: the sale of oil assets by the Videocon group amounting to USD 2.48bn, and the sale of two hydro power plants amounting to INR 105bn by the Jaypee group. Videocon and Jaypee account for 52% of the total assets sold in the last 12-18 months Figure 3: Asset sales by large groups Majority of the assets have been sold in the last 9-10 months Asset (s) sold INR bn Asset (s) sold as a % of pre-sale debt % Debt / EBITDA (pre-sale) x Debt / EBIDTA (post-sale) x Videocon 144.5 35.2 29.9 19.4 Jaypee 143.0 22.4 9.2 7.1 GMR 99.9 23.4 12.1 9.3 DLF - FY11 5.4 2.3 5.5 5.4 DLF - FY12 36.2 12.1 6.7 5.9 DLF - FY13 29.2 9.4 7.9 7.1 Tata Power 31.0 8.1 6.4 5.9 IVRCL 22.0 33.3 20.8 13.9 Adani 12.5 1.5 11.9 11.7 R Com 12.0 3.4 4.4 4.2 Lanco 6.5 1.5 23.7 23.4 Suzlon 3.8 2.5 (9.4) (9.2) Tata Com 1.9 1.0 5.5 5.4 Punj Lloyd 1.2 1.8 5.7 5.6 549.2 12.7 10.1 8.8 Group Total Note: Details of assets sold by these groups is available in Appendix 1. Source: Company, BSE India, Live Mint, The Economic times, Business Standard, NDTV, Standard Chartered Research Figure 4: Putting asset sales in perspective of total system loans Factoring in all sales (past and pipeline) the proportion of their debt to system loans drops, but still remains high at 11.7% against 13.9% earlier INR bn Debt of groups that have / will sell assets, INR bn Total system debt % share 7,427 53,464 14 Source: Standard Chartered Research Jaypee Power deal is an ideal benchmark for lenders: The sale of assets by the Jaypee group is an ideal case for banks. Banks have managed to convince the promoter to sell two profitable hydro power plants. The assets are being sold to a consortium led by Taqa, an international energy and water company based in Abu Dhabi. Sale of core assets by a company is unprecedented in India. We believe this might be achieved because the debt was concentrated with a few banks with the lead bank having a high share of the total. In our view, the lead bank also holds a disproportionate share of the promoter’s equity through pledge of promoter shares, which helped in the quick resolution of stress. In the case of Jai Prakash Power, the promoters have pledged 97% of their equity in the company to lenders giving lenders a big say in the resolution of debt related issues. The huge sale of oil assets by Videocon was touted as one of the best deleveraging deals. The deal was announced in June 2013, before Videocon’s annual report for FY13 was available. From the latest annual report, we find that the total debt of Videocon has risen sharply from INR 273bn as of December 2011 to INR 411bn as of 30 June 2013. On the higher base, the sale does not look as attractive as it did on old debt numbers. 11 March 2014 3 Equity Research l India financials Can banks repeat this feat? While more such deals are required to deliver meaningful deleveraging, it will not always be easy for banks to replicate these deals, because the loans and the consequent promoter pledges may not be concentrated with a few banks. Figure 5: Pledged promoter holdings are very high for some companies % of promoters holding pledged 100 Mar'12 Dec'13 90 80 70 60 50 40 30 20 10 Jaiprakash Associates Tata Power Tata Com. Punj Llyod Ramky Infra. Adani Enterprises Dishman Pharma Bhushan Steel JSW Steel Essar Oil GMR Infra. NCC Videocon Lanco Infratech Suzlon Energy Jaypee Infratech Unitech Jaiprakash power - Source: BSE, Standard Chartered Research Why have asset sales been slow? 80-90% of promoter holding pledged While the pace of asset sales has picked up, it is not enough to reduce leverage in a meaningful way. We list the reasons for this: Not enough takers for all asset classes Banks point out that while there is meaningful demand for operational road assets, demand for many assets classes remain weak – especially thermal power, small steel plants and telecom. Thermal power, which is the most stressed sector, has few takers because of lack of availability of coal. State-owned NTPC has recently shown interest in buying operational thermal plants. Given its free cash, it could buy at best 2-3 such plants. Any acquisition of a private thermal plant by NTPC can only happen after the elections given that NTPC is state owned. Promoter expectations high at the start, now buyers know they can bargain Two years ago when banks appealed to promoters to start disposing off assets, their expectations were very high. With a deteriorating macro and the RBI insistent that banks resolve stress quickly, promoters have moderated their expectations. But buyers too have become choosy given the huge macro risks. High pledges only in a few: The proportion of promoter equity stake pledged to banks is high only in a few cases. Here, banks have started exercising pressure on promoters to sell productive assets. Debt/EBIDTA will reduce only marginally after fresh asset sales in the next two years 11 March 2014 More assets on the block, but high leverage will still remain an issue post sale: The pace of assets sales is likely to accelerate over the next 12 months. Companies have already announced plans to sell assets worth INR 602bn, amounting to 11.6% of their debt. Even with these asset sales, their leverage is likely to remain high. After factoring in asset sales, debt/ EBITDA of these groups is likely to decline, but still remain high at 6.7x (currently at 7.6x), in our view. 4 Equity Research l India financials Figure 6: Proposed asset sales Proposed assets sale (INR bn) Debt (INR bn) Proposed asset sale as a % of debt (%) Bharti 124 1,153 Reliance Infrastructure 117 Lanco Debt/Equity (Leverage) Pre-sale (x) 10.8 294 61 Stemcore GVK Debt/EBITDA Post-Sale (x) Pre-sale (x) Post-Sale (x) 2.0 1.8 4.2 3.7 39.8 1.1 0.7 7.1 4.3 425 14.4 16.0 13.7 23.7 20.3 60 143 42.1 NA NA NA NA 56 222 25.2 7.3 5.4 18.7 14.0 Jaiprakash Associates (Consolidated) 39 637 6.1 4.8 4.5 9.2 8.6 Unitech 35 135 25.6 1.2 0.9 42.5 31.6 Tata Communication 32 193 16.3 25.6 21.4 5.5 4.6 NCC Limited (Earlier known as Nagarjuna Construction Company) 25 71 35.0 2.6 1.7 8.7 5.6 Essar Group (Consolidated) 22 968 2.3 2.4 2.3 16.9 16.6 Essar Steel (Standlaone) 22 360 6.2 8.9 8.3 Ramky Infrastructure 9 38 23.8 2.5 1.9 46.3 35.3 Anant Raj Industries 9 19 48.1 0.5 0.2 11.5 6.0 Dishman Pharma 7 12 56.2 1.1 0.5 3.1 1.4 Viceroy Hotels 6 12 46.9 5.1 2.7 42.0 22.3 Loop Mobile 2 6 25.0 NA NA NA NA Madhucon Projects Ltd NA 14 NA 2.1 NA 6.9 NA Reliance Communication NA 353 NA 1.3 NA 4.4 NA Tata Power NA 491 NA 4.3 NA 6.9 NA 602 5,186 11.6 2.5 2.2 7.6 6.7 Total Note: Details on proposed asset sales by these groups is available in Appendix 2 Source: Company, BSE India, Live Mint, The Economic times, Business Standard, NDTV, Standard Chartered Research estimates 11 March 2014 5 Equity Research l India financials Refinancing has played a big role in providing liquidity to the stressed groups Refinancing of large corporates has played a big role in providing liquidity to some of the large overleveraged groups. Refinancing can happen in several ways: Promoters bringing in some funds to pay off immediate debt obligations so that banks can refinance/ reschedule longer-term obligations by replacing old loans with new loans, Replacing old loans with new loans without promoter contribution, Dollarisation of debt. Replacing/repaying rupee loans through dollar loans has also become a common practice. More importantly, a lot of these dollar loans are guaranteed by Indian banks through SBLCs (stand-by letters of credit). So the risks of repayment is on the Indian lenders that guarantee the debt. The key objectives of refinancing are to (1) roll over/increase the maturities of debt by replacing old loans with new loans of longer tenors and (2) reduce finance costs by seeking to convert rupee debt to dollar debt. The following cases highlight recent refinancing of loans by banks: Aircel refinanced twice in FY14: According to media reports, the telecom company Aircel was recently refinanced by banks. The promoter, Maxis, brought in quasi-equity of INR 60bn in October 2013. The funds were infused by the promoter after banks asked Aircel to bring more money into the company before approving a four-year moratorium on payment of loan principal. Following fund infusion by the promoter, Aircel, which was to begin paying part of the principal amount from next year, has got a major reprieve and has managed to refinance/reschedule its debt. Prior to this refinancing, Aircel also got a temporary refinancing line from IDFC and Credit Suisse that lent short-term loans of INR 80bn to the company in August 2013. Aircel’s total debt is estimated at INR 200bn with interest outgo of INR 25bn every year. http://www.business-standard.com/article/companies/maxis-infuses-rs-6-000-cr-tofund-aircel-s-interest-outgo-113102000735_1.html Essar Oil and Essar Steel, two large accounts that dollarized debt: Essar Oil has dollarized USD 2.3bn of debt as of December 2013, which is c.75% of its total debt, to reduce interest outgo and also to extend the repayment period of the loan. A consortium led by SBI in FY14 refinanced Essar Steel’s debt. The company was also given fresh funds of INR 60bn. A large part of the refinancing was done through dollarization of debt most of which would be backed by SBLCs. Essar Steel’s total debt is INR 360bn. It earned core EBITDA of INR 11.6bn in FY13, but reported a net loss of INR 51.0bn. http://www.financialexpress.com/news/essar-steel-likely-to-get-another-rs-6000-crwill-help-firm-avoid-cdr/1161962. http://www.dnaindia.com/money/report-essar-extends-dollarisation-of-debt-to-steel1850987. http://www.bloomberg.com/news/2012-11-07/essar-said-to-plan-4-8-billiondebt-refinance-corporate-india.html 11 March 2014 6 Equity Research l India financials http://www.ifrasia.com/essar-joins-credit-enhancement-trend/21132506.article Bhushan Steel likely to get additional bank funds: Recent media reports suggest that Bhushan Steel could be in the process of refinancing its existing loans and seeking additional funds of INR 70bn. Bhushan Steel’s total debt is INR 338bn. http://articles.economictimes.indiatimes.com/2014-0225/news/47670669_1_capacity-expansion-221-20-crore-crore-loan With temporary relief to large overleveraged groups, new NPLs will continue to come from small/mid corporates as in the past: As most large overleveraged groups have enough liquidity at least for the next few quarters, new NPL formation will continue to come from the small and mid corporate segment, like in the past. The key investor fear that the slippage of one large overleveraged corporate could lead to a 50-70% increase in system NPLs has been deferred, at least temporarily. Large, overleveraged groups are still standard assets with banks: Except for Lanco and a few small projects of some groups, the large overleveraged groups remain standard accounts with banks. The table below shows that only a handful of companies \ projects belonging to large overleveraged groups are classified as restructured. Most others are standard loans. Figure 7: Only a few overleveraged companies are restructured Group debt As of Sep'13 Debt, INR bn 75 INR bn 425 Bina Power of the Jaypee group 32 637 Mar'13 Was earlier classified as restructured due to shift in COD. Following new RBI guidelines it now qualifies to be a standard asset GMR Rajmundhry Energy (gas based) 26 542 Sep'13 Restructured Lanco's Udupi Power 35 425 Sep'13 Was earlier classified as restructured due to shift in COD. Following new RBI guidelines it now qualifies to be a standard asset GVK's Alaknanda Hydro 16 222 Sep'13 Was earlier classified as restructured due to shift in COD. Following new RBI guidelines it now qualifies to be a standard asset GVK Coal Tokisud Company Pvt Ltd 3 222 Sep'13 Restructured Lanco's Anpara Power 33 425 Sep'13 Was earlier classified as restructured due to shift in COD. Following new RBI guidelines it now qualifies to be a standard asset ADAG's Sasan Power 200 1,095 Company Lanco Infratech (Parent) Comments Restructured Sep'13 (Debt of Rel Was earlier classified as restructured due to shift in Power, Rel Infra and COD. Following new RBI guidelines it now qualifies to Rel Comm.) be a standard asset Source: Company, BSE, Standard Chartered Research estimates The RBI’s new guidelines on early resolution of distressed debt could also be used to resolve stress in small and mid corporate accounts only, not in large corporates: the RBI recently published detailed guidelines for the early resolution of debt. From our discussions with lenders, it appears that the lenders will use this new framework to resolve potential stress in the mid and small corporates, not in the large corporate segment. Bankers say that they have already been informally using this framework for large corporate debt. They have been sharing data on large corporate loans with each other much before the proposal of forming a central repository was mooted through these recent RBI guidelines. 11 March 2014 7 Equity Research l India financials Why the long-term situation is still precarious While the short-term relief to large corporates is welcome, we believe long-term risks remain high. Over the past two years, when economic growth slowed and demand slackened, these corporates added more debt mostly by drawing on existing approvals for new projects and partly due to higher working capital requirements with a weaker macro. The table below shows the increase in debt of large overleveraged groups over the past three years even while their profitability remained weak. Corporate stress continues to rise as is evident from Indian companies’ increasing debt and declining ability to service debt. The total debt of BSE 500 companies increased 22% p.a. over FY09-FY13, while net profit increased at a much slower pace of 10%. Moreover, the debt of large corporate groups has grown at a faster pace than for overall corporate debt, thanks to easy liquidity over 2009-2011. Eleven large overleveraged corporates that have lined up huge capex and are not yet earning free cash flows have seen their debt rise sharply by 137% over FY10-FY13, while their operating profit has risen at a much slower pace of 90% over this period. As a result, the debt to EBIDTA ratio of this universe has increased to an uncomfortably high 7.3x in FY13 from 5.9x in FY10. 11 March 2014 8 Equity Research l India financials Rising leverage, falling cover are big risks Corporate stress continues to rise as is evident from Indian companies’ rising debt and declining debt servicing ability. Total debt of BSE 500 companies has increased by 22% p.a. over FY09-FY13, while net profit has increased at a much slower pace of 10%. Moreover, debt of large corporate groups has grown much faster than the overall corporate debt thanks to easy liquidity over 2009-2011. Eleven large overleveraged corporates that have lined up huge capex and are not yet earning free cash flows have seen their debt rise sharply by 137% over FY10-FY13, while their operating profit has risen at a much slower pace of 90% over this period. As a result, the debt to EBITDA ratio of this universe has increased to an uncomfortably high 7.3x in FY13 from 5.9x in FY10. The average debt to EBITDA ratio of 11 large overleveraged corporates has risen to 7.3x in FY13 from 5.9x in FY10 Figure 8: Companies / groups with very high leverage Total debt FY13 (INR bn) Debt / EBITDA FY13 (x) Adani 807 10.3 9.6 363 329 2.9 Essar Group 968 16.9 8.4 124 11 2.4 GVK 186 23.8 9.5 319 67 5.1 GMR 427 12.1 13.6 105 131 4.9 Jaypee Group 637 9.2 12.6 81 148 4.8 Videocon Group 273 10.2 6.2 126 37 1.8 Lanco 345 13.1 4.9 313 54 9.4 Total Reliance ADAG Group 914 6.7 3.7 125 24 1.1 Reliance Communication 417 5.8 3.7 40 (10) 1.1 Reliance Power 276 13.3 3.1 1,131 189 1.2 Reliance Infrastructure 221 5.0 3.7 158 88 0.7 Bhushan Steel 291 8.7 7.9 75 58 3.2 JSW Steel 219 3.5 3.5 35 35 1.5 Vedanta 906 3.2 3.8 143 190 0.5 5,973 7.3 5.9 137 90 1.5 Total Debt / EBITDA Increase in debt Increase in EBITDA Debt / Equity FY10 (x) FY13/FY10 (%) FY13/FY10 (%) (x) Source: Company, Bloomberg, Economic Times, Business Standard, Standard Chartered Research estimates Large groups have increased debt by 137% while their EBDITA has grown slower at 90% over FY10-FY13. 11 March 2014 9 Equity Research l India financials Figure 9: Movement of debt of large groups (INR bn) FY10 FY11 FY12 FY13 6MFY14 3 year CAGR CAGR over Mar-11 to Sep-13 Videocon 121 144 273 411 NA 50 NA GMR 209 244 362 427 542 27 38 DLF 217 240 300 310 288 13 8 Jaiprakash Associates (Standalone) 179 217 231 266 291 14 12 Jaiprakash Associates (Consolidated) 353 444 537 637 NA 22 NA Jaiprakash Power (Standalone) 68 133 175 232 NA 51 NA IVRCL 33 43 60 66 NA 26 NA Adani 175 329 695 694 776 58 41 Essar Group 431 306 746 968 NA 31 NA 44 55 139 186 219 61 73 GVK Lanco 84 167 312 345 396 60 41 Total Reliance ADAG Group 405 632 742 914 1,095 31 25 Reliance Communication 297 391 372 417 504 12 11 22 73 185 276 328 131 82 Reliance Power Reliance Infrastructure 86 168 184 221 263 37 20 Bhushan Steel 166 217 213 291 338 20 19 JSW Steel 162 165 214 219 369 11 38 Vedanta 373 440 874 901 1,040 34 41 2,773 3,426 5,467 6,369 NA 32 NA Total Source: Company, Bloomberg, Standard Chartered Research estimates Figure 10: Valuations Price target (INR) FY14E PBR (x) FY14E PER (x) FY15E PBR (x) FY15E PER (x) 77 66 0.4 3.8 0.3 3.2 577 550 0.7 5.2 0.6 4.4 176 125 0.4 3.4 0.4 3.0 UP 566 435 0.6 4.9 0.5 4.0 UP 1,550 1,445 1.0 9.0 0.9 7.8 1,330 1,225 1.0 8.2 0.9 7.0 2.6 Ticker Rating Allahabad Bank ALBK IN UP Bank of Baroda BOB IN IL Bank of India BOI IN UP Punjab National Bank PNB IN State Bank of India SBIN IN Mkt. Price (INR) State banks State Bank of India (adj. for subsidiaries) Union Bank of India UNBK IN IL 106 120 0.4 3.1 0.3 Axis Bank AXSB IN IL 1,294 990 1.6 10.6 1.4 9.4 HDFC Bank HDFCB IN OP 672 740 3.5 19.8 3.0 16.3 ICICI Bank ICICIBC IN OP 1,069 1,105 1.7 13.8 1.5 12.0 IndusInd Bank IIB IN IL 411 405 2.4 15.5 2.1 12.8 Yes Bank YES IN IL 320 330 1.6 9.4 1.3 6.6 HDFC HDFC IN IL 822 900 4.5 23.1 3.9 19.3 IDFC IDFC IN IL 100 110 1.0 7.8 0.9 7.0 LIC Housing Finance LICHF IN IL 208 240 1.4 8.3 1.2 7.2 M&M Financial Services MMFS IN IL 245 235 2.7 15.6 2.4 13.2 Shriram Transport SHTF IN OP 579 750 1.6 9.5 1.4 8.3 Shriram City Union SCUF IN OP 964 1,300 1.9 11.3 1.5 9.8 Private banks Finance companies Prices as on 4 March 2014 Source: Bloomberg, Standard Chartered Research estimates 11 March 2014 10 Equity Research l India financials Appendix 1: Details of assets sold Seller Asset Sold Buyer Consideration Latest debt Date of INR bn the deal Videocon Videocon Mauritius Energy Holding of Videocon in Mozambique block i.e. 10% Limited participating stake in Mozambique’s Rovuma-1 area ONGC Videsh Ltd and Oil India Ltd USD 2.48bn 410.93 Jun-13 INR 38bn 637.45 Sep-13 Jaiprakash Associates Jaypee Cement Corporation Ltd. 100% stake in 4.8mn TPA Gujarat Cement Plant UltraTech Cement Ltd. Jaiprakash Power Sold two hydro power projects in Kinnaur district Consortium led by Abu Dhabi National Energy Company PJSC (TAQA) INR 105bn 637.45 Feb-14 70% holding in GMR Energy (Singapore) Pte Ltd. (800 MW of natural gas power plants in Singapore. Asset is 96% complete). FPM Power Holdings Limited INR 70.9bn 542.50 Mar-13 542.50 Mar-13 542.50 Mar-13 GMR GMR Infrastructure (Singapore) Pte Ltd 50% equity in Tshedza Mining Resource (Pty) Ltd., Tshedza Mining Resource which holds the license for the development of Eloff (Pty) Ltd mines. Ferret Coal (Kendal) (Pty) Ltd. Sale of GMR’s holding of Ferret Coal (Kendal) (Pty) Ltd. The Kendal mine is an operating mine and sells coal in the domestic market. Current partner INR 2.0bn GMR Highways Ltd 74% stake in GMR Jadcherla Expressways Ltd., which operates the Farukhnagar-Jadcherla highway in Andhra Pradesh Macquarie SBI Infrastructure Fund INR 2.1bn 542.50 Feb-13 GMR Highways Ltd 74% stake in GMR Ulundurpet Expressways Private Limited India Infrastructure Fund (IIF) of IDFC Ltd. INR 5.9bn 542.50 Sep-13 Group GMR Group has sold a 40% stake in Istanbul Sabiha Malaysia Airport Holdings Gokçen International Airport, which it manages in Turkey Euro 225mn 542.50 Dec-13 INR 798mn 288.47 Oct-13 INR 674mn 288.47 Oct-13 INR 3bn 288.47 Jul-13 INR295.2mn 288.47 Jul-13 DLF DLF Home Developers Ltd. and DLF Projects Ltd. 60% stake in Star Alubuild Private Limited (Star Alubuild), a subsidiary. DLF Home Developers Ltd. (DHDL) Sold 33 MW of wind turbines situated at Rajasthan Violet Green Power Pvt. Ltd., a subsidiary of Leap Green Energy Pvt. Ltd. DLF Ltd. Entered into definitive agreement: 74% equity stake in its the Life Insurance Joint Venture - DLF Pramerica Life Insurance Company Ltd, a joint venture with Prudential International Insurance Holdings Ltd Dewan Housing Finance Corporation Ltd ("DHFL") & its group entities DLF Ltd. Definitive Business Transfer Agreement for transferring an unit comprising of 11.2 MW capacity wind turbines situated at Gadag, Karnataka on ‘as is where is basis’ by way of a slump sale Goyal MG Gases Private Limited DLF Ltd. 150 MW capacity wind turbines situated in Kutch, Gujarat BLP Vayu (Project 1) Private Ltd., a subsidiary of Bharat Light & Power Pvt. Ltd. INR 3.3bn 288.47 Jan-13 DLF Home Developers Ltd. (DHDL) Definitive Agreement: Tamil Nadu wind mill undertaking of 34.5 MW capacity including related assets and liabilities (including current assets and liabilities) and relevant long-term loans of the said undertaking by way of a slump sale Tulip Renewable Powertech Private Limited (Tulip) INR 1.9bn 288.47 Apr-13 DLF Ltd. 17-acre plot in Mumbai - Jawala Real Estate Pvt. Ltd. Lodha Developers Limited INR 27.3bn 288.47 Aug-12 DLF Hotel Holdings Limited Divested its entire shareholding in Adone Hotels and Hospitality Limited INR 5.7bn 288.47 Jun-12 DLF Ltd. DLF (67%) along with its joint venture partner Hubtown Limited (33%), have sold 100% of their respective shareholding in DLF Ackruti Info Parks (Pune) Limited. 'DLF Ackruti' owns a notified IT/ITES SEZ located in Pune, Maharashtra. INR 5.4bn 288.47 Dec-11 USD 350mn 288.47 Feb-14 DLF Global Hospitality Ltd Aman Resorts Real estate fund affiliated with The Blackstone Group, BRE/Mauritius Investments II Adrian Zecha Source: Company, BSE India, Live Mint, The Economic times, Business Standard, NDTV, Standard Chartered Research 11 March 2014 11 Equity Research l India financials Appendix 1: Details of assets sold (continued) Seller Asset Sold Buyer 30% stake in PT Arutmin mine (Indonesia) Bakrie group entity Consideration Latest debt Date of INR bn the deal TATA POWER Tata power USD 500mn 490.7 Jan-14 INR 22 bn 67.04 Apr-13 USD 230mn 868.74 Jan-13 INR 12bn 352.80 Jul-13 €77 million 424.85 Feb-14 USD 28mn 167.95 Sep-13 INR 2bn 167.95 Apr-13 INR 1.9bn 193.14 Apr-13 USD 20mn 92.66 Oct-13 Undisclosed 134.85 Oct-13 IVRCL Ltd IVRCL Ltd. Three build, operate and transfer (BOT) road projects TRIL Roads Pvt. Ltd, a Tata in Tamil Nadu: group company Salem Tollways Limited Kumarapalayam Tollways Limited IVRCL Chengapally Tollways Limited Adani Abbot Point Terminal Terminal in Australia, acquired two years ago for USD Group’s promoters (Adani 235mn along with debt of USD 2bn, sold to the Family) promoters. Believed to be sold back at the acquisition price. Reliance Communication RCOM Securitisation Under USD 200mn) Inter-City Fibre Agreement With Reliance Jio Infocomm Reliance Jio Infocomm 70 MW Lanco Budhil hydropower project and two smaller plants of 5 MW each in Himachal Pradesh Greenko Energies Pvt. Ltd LANCO Lanco Infratech Limited Suzlon Suzlon Energy 75% stake in China Subsidiary, Suzlon Energy Tianjin Poly LongMa Energy (Dalian) Limited Ltd. Suzlon Energy Sale of a block of wind assets Tata Communication TCL Sold the land parcel and building situated at Nungambakkam, Chennai Punj Llyod Punj Lloyd Pte Ltd Sold its entire shareholding in Olive Group Capital Limited, comprising 27.78% of its capital UNITECH Unitech Wireless 33.75% stake in mobile phone and accessories distributor Unitech Wireless Telenor Source: Company, BSE India, Live Mint, The Economic times, Business Standard, NDTV, Standard Chartered Research 11 March 2014 12 Equity Research l India financials Appendix 2: Details of planned asset sales Seller Asset on sale Bharti Plans to sell most of its transmitter towers in Africa Reliance Infrastructure Plans to sell either all or most of its 11 road projects to pare debt Expected consideration INR bn Latest debt INR bn 122 1,153.10 117.0 294.3 Lanco Lanco Infratech Limited Lanco is examining options including a full sale of its Australian unit Griffin Coal Mining Co., which it bought for 750mn Australian dollars in 2011 31.0 424.8 Lanco Infratech Limited Plans to sell the 1,200 MW Udupi Power Corp. Ltd in Karnataka 30.0 424.8 STEMCORE Assets in India of UK steel trader Stemcor Holdings Ltd 60.0 142.60 GVK Likely to finalise stake dilution in its airport business over the next couple of months and the proceeds will be used to clear INR 25bn of non-operational debt. 25.0 222.4 Likely to sell its stake in two Indonesian airport projects 30.5 222.4 Jaypee Sports International Ltd Planning to sell the group’s real estate assets to pare debt by INR 10bn 10.0 637.4 Jaiprakash Associates 74% stake in two cement joint ventures with SAIL 29.0 637.4 Unitech Planning to sell two hotels near Delhi and land parcels in southern cities 8.5 134.9 Already in the process of selling a 3.6mn square feet IT SEZ in Gurgaon 26.0 134.9 Exclusive discussions with Vodacom Group Limited (Vodacom) to sell all of the issued share capital of Neotel, held directly or indirectly by the company. The sale will also include the company's direct and indirect loan claims in Neotel. 31.5 193.1 NCC Limited (Earlier known as Nagarjuna Construction Company) Plan to sell 5 BOT road projects and some real estate projects 25.0 71.4 Essar Group / Essar Steel Essar Steel to raise INR 22.4bn by selling three non-core assets 22.4 967.5 Ramky Infrastructure Ltd. Plans to raise INR 9bn (USD 146mn) by selling stakes in its three highway projects to repay debt 9.0 37.8 Anant Raj Industries Planning to sell two hotel properties in the Delhi-NCR region for an estimated INR 9bn as part of the company's strategy to monetise non-core assets. 9.0 18.7 Dishman Pharma Plans to sell its China plant to pare off some debt. The plant is in the Shanghai Chemical Industry Park had started operations last year and is currently making intermediates and speciality chemicals. 1.6 11.7 Plans to sell its special economic zone (SEZ) land in Gujarat to reduce debt 5.0 11.7 Viceroy Hotels To sell the Chennai division 5.6 11.9 Loop Mobile Plans to sell some of its real estate properties 1.5 6.0 Madhucon Projects Ltd. Plans to sell at least a 74% stake in Madhucon Agra-Jaipur Expressways Ltd NA 14.34 Reliance Communication Samena Capital, in a proposed consortium with certain other global PE funds, is at an advanced stage of the process of due diligence and completion of definitive documents in relation to the acquisition of Reliance Globalcom Ltd., RCom's global communications services business unit. NA 352.8 Tata Power May sell some of its investments and raise equity to help slash a USD 4.9bn debt pile. Tata Power's financial investments include stakes in sister firms in the salt-to-software Tata conglomerate, including 17% of Tata Communications, valued at roughly USD 180mn, and shares in Tata Teleservices (Maharashtra) Ltd and Tata Consultancy Services Ltd. NA 490.7 Jaiprakash Associates Tata Communication VSNL SNOSPV Pte Ltd Source: Company, BSE India, Live Mint, The Economic times, Business Standard, NDTV, Standard Chartered Research 11 March 2014 13 Equity Research l India financials Disclosures appendix The information and opinions in this report were prepared by Standard Chartered Bank (Hong Kong) Limited, Standard Chartered Bank Singapore Branch, Standard Chartered Securities (India) Limited, Standard Chartered Securities Korea Limited and/or one or more of its affiliates (together with its group of companies, ”SCB”) and the research analyst(s) named in this report. THIS RESEARCH HAS NOT BEEN PRODUCED IN THE UNITED STATES. 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