There seems to be more upside in the stock of Orient Power Company Ltd. The company’s shares have jumped 14 per cent intra-day after reports came out today that Infrastructure Leasing and Financial Services (IL&FS) is in advanced talks to merge its wind energy assets with the company, which will value the combined entity at Rs 4,500-5,000 crore and create one of India’s largest listed wind energy companies having a capacity of 1,400MW.
IL&FS, India's leading infrastructure financier, will be the largest shareholder with more than 50 per cent stake, followed by Shriram Ventures and Orix Corporation of Japan.
Shriram Ventures held 22 per cent in Orient as on September 30. Considering this shareholding, it is much higher (about 33 per cent) than its current full market capitalisation of Rs 825 crore.
The media report said the boards of the two companies are expected to meet soon and discuss a merger proposal. If cleared, the deal will help the entity acquire more wind energy assets and raise its capacity to over 2,000 megawatts (MW) by FY18.
The exchange has sought clarification of the likely deal though. To this, the company has replied saying that the company is considering multiple proposals in this regard and an appropriate decision would be taken at today’s board meeting.
The company, which has been making losses since inception due to high interest expenses, had expressed its plans to double wind energy capacity to 1000 MW by 2020.
The company reported a net profit of Rs 82.88 crore in September 2016 compared with a net loss of Rs 21.32 crore in the same period a year ago. Net sales rose 11.62 per cent to Rs 154.81 crore, led by its main business — wind energy.
Improvement in financial performance looks sustainable due to higher capacity, leading to operational efficiencies and expected higher offtake from utilities.
The company said, earlier, it has extended the repayment tenure of the majority of its term loan portfolio in Beta wind assets under the 5:25 flexible structuring scheme for a tenure of 17 years ending 2033, which would improve the cash flows in FY17 and in the years to come. The company’s consolidated long-term borrowings stood at Rs 1,919 crore as on September 30.
Besides this, the company continues to focus on reducing its debt partly by reducing some assets in biomass — its secondary business.