Piramal Group is planning to set up an aggregation cum investment platform for renewable energy assets, group chairman Ajay Piramal pointed as per the news reports. The company will also get an external investor to set up the renewable energy-focused asset aggregation business. hough Piramal did not provide the details on the size of the planned investments, he said that the platform could be along the lines of the $1 billion stressed assets platform, reports added.
The $10 billion glass-to-financial services group has tie-ups with several foreign investment firms for its real estate and stressed assets businesses. In February 2017, Piramal Enterprises had entered into a strategic partnership with Ivanhoé Cambridge, a real estate subsidiary of Caisse de dépôt et placement du Québec (CDPQ), Canada’s second largest pension fund, to provide long-term equity capital to top residential developers across five Indian cities.
In 2016, it had also set up a distressed asset investment platform, along with private equity firm Bain Capital Credit, to invest in stressed assets. The two entities will jointly invest about $1 billion in restructuring opportunities across India, along with the World Bank’s International Finance Corporation, which has also agreed to commit capital towards the fund.
Sector experts say that foraying into the renewable energy segment can be challenging, given the stiff competition and low tariffs. However, Piramal remains confident of his strategy.
“Through Piramal Capital’s debt business, we have funded 11% of renewables capacity till date. We are open to a strategic alliance with a suitable capital provider, at an appropriate point in time,” Piramal said. In June 2017, Piramal Finance Ltd (now Piramal Capital and Housing Finance Ltd), a unit of Piramal Enterprises, had sanctioned ₹700 crore to ACME Solar Holdings Ltd.
The company, along with its partner Dutch pension fund asset manager APG Asset Management, initially invested ₹499 crore in ACME in July 2016. The same year, Pirmal Enterprises and APG had committed ₹900 crore towards Essel Infrastructure Ltd’s solar platform.
And, in May 2017, the company had provided $100 million through its structured financing group (SFG) to renewable energy company ReNew Power Ventures Pvt. Ltd. “In terms of volume of activity, the sector looks very attractive, as 25-30GW of capacity addition opportunity will come up every year, for the next few years, given the 225GW target set for 2022. However, tariff-based competitive bidding and competition is resulting in a squeeze in equity returns. Without innovative business models, it is becoming difficult for renewable energy platforms to generate target returns,” said Debasish Mishra, energy and resources leader, Deloitte India. Currently, tariffs for both solar and wind power are hovering at ₹2.40-2.60 per unit.