Reliance Energy in recast mode
Company to restructure businesses under 3 verticals - utility, infrastructure & real estate.
By Nevin John, TNN |
MUMBAI: The Anil Ambani-promoted Reliance Energy (REL) is believed to be restructuring its businesses under three verticals — utility, infrastructure and real estate. The company wants to be known as an infrastructure player rather than a pure power utility with forays into projects such as roads, metro rail and real estate.
“The power generation, transmission and distribution businesses will come under utility vertical. While the Mumbai metro rail and various road projects undertaken by REL will together form the infrastructure vertical, all residential and commercial real estate projects will come under the third vertical,” said sources in the know. The company spokesperson refused to comment on the proposed restructuring. “We would not like to comment at this moment,” said a spokesperson.
REL’s fast-growing engineering, procurement and construction (EPC) division is expected to be spun off into a separate company. “By creating verticals, the company can separate out the businesses having conflicting interests. The financial requirements of power, infrastructure and real estate projects are different. Moreover, the risk profile and skill sets of each business have no similarities. As the returns of these businesses are different, the restructuring will unlock value of the profitable entities,” said a Delhi-based analyst.
Currently, REL has two key divisions — power and EPC. The power division, which includes generation, transmission and distribution businesses, contributes about 63% of overall revenues while balance comes from the EPC division. “However, going forward, REL is likely to be seen as an infrastructure company rather than a pure power utility,” said a recent report from the Mumbai-based stock-broking firm Prabhudas Lilladher.
REL is focusing on the boom in infrastructure, where significant opportunities exist in the utility, infrastructure, real estate and coal mining / oil and gas exploration space, said another report from Merrill Lynch.
On Wednesday, REL stock price fell 5.6% to Rs 1,026.20 on BSE. Its shares had rallied up over 100% in the past 5 months on expectations of capacity additions, huge EPC orders and the value of the coal bed methane (CBM) blocks won by REL.
The company is planning to increase its power generation capacity to 15,000MW from the current 941MW with an investment of Rs 60,000 crore by 2012. REL distributes electricity in Delhi through its group companies BSES Rajdhani and BSES Yamuna. The company directly sells power in Mumbai, where it has 25 lakh consumers. The government has recently cleared two transmission line projects of REL having a capex of Rs 3,500 crore.
REL had bagged the Mumbai metro rail phase-I project and five National Highway Authority of India (NHAI) road projects totalling 401 kms. It has been shortlisted for the metro rail phase-II bid as well. The worth of road and metro projects of REL is over Rs 6,000 crore. The EPC division has an order book of Rs 5,520 crore now.
The company plans to bid for a Rs 20,000 crore worth EPC projects over the next one year. REL also has around 80 acres in Hyderabad, wherein it plans to develop hospitality, residential and commercial complexes. The AP government has given the signal to REL for a 100-storeyed trade tower-cum-business centre at Manchirevula, Hyderabad.
“The power generation, transmission and distribution businesses will come under utility vertical. While the Mumbai metro rail and various road projects undertaken by REL will together form the infrastructure vertical, all residential and commercial real estate projects will come under the third vertical,” said sources in the know. The company spokesperson refused to comment on the proposed restructuring. “We would not like to comment at this moment,” said a spokesperson.
REL’s fast-growing engineering, procurement and construction (EPC) division is expected to be spun off into a separate company. “By creating verticals, the company can separate out the businesses having conflicting interests. The financial requirements of power, infrastructure and real estate projects are different. Moreover, the risk profile and skill sets of each business have no similarities. As the returns of these businesses are different, the restructuring will unlock value of the profitable entities,” said a Delhi-based analyst.
Currently, REL has two key divisions — power and EPC. The power division, which includes generation, transmission and distribution businesses, contributes about 63% of overall revenues while balance comes from the EPC division. “However, going forward, REL is likely to be seen as an infrastructure company rather than a pure power utility,” said a recent report from the Mumbai-based stock-broking firm Prabhudas Lilladher.
REL is focusing on the boom in infrastructure, where significant opportunities exist in the utility, infrastructure, real estate and coal mining / oil and gas exploration space, said another report from Merrill Lynch.
On Wednesday, REL stock price fell 5.6% to Rs 1,026.20 on BSE. Its shares had rallied up over 100% in the past 5 months on expectations of capacity additions, huge EPC orders and the value of the coal bed methane (CBM) blocks won by REL.
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The company is planning to increase its power generation capacity to 15,000MW from the current 941MW with an investment of Rs 60,000 crore by 2012. REL distributes electricity in Delhi through its group companies BSES Rajdhani and BSES Yamuna. The company directly sells power in Mumbai, where it has 25 lakh consumers. The government has recently cleared two transmission line projects of REL having a capex of Rs 3,500 crore.
REL had bagged the Mumbai metro rail phase-I project and five National Highway Authority of India (NHAI) road projects totalling 401 kms. It has been shortlisted for the metro rail phase-II bid as well. The worth of road and metro projects of REL is over Rs 6,000 crore. The EPC division has an order book of Rs 5,520 crore now.
The company plans to bid for a Rs 20,000 crore worth EPC projects over the next one year. REL also has around 80 acres in Hyderabad, wherein it plans to develop hospitality, residential and commercial complexes. The AP government has given the signal to REL for a 100-storeyed trade tower-cum-business centre at Manchirevula, Hyderabad.
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