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Reliance Infra stock closes 5.54% higher on sale of energy business to Adani Transmission

Reliance Infra stock closes 5.54% higher on sale of energy business to Adani Transmission

A day after Reliance Infra announced the completion of Rs 18,800-crore deal for sale of its energy business in Mumbai to Adani Transmission, its stock closed higher in trade today.  The Reliance Infra stock closed 5.54% or 24 points higher at 463.10 level on the BSE. The stock has been gaining for the last four days and clocked 13% returns during the same period.

The stock has fallen 16.37% since the beginning of this year and lost 8.56% during the last one year.

The deal, largest in the power sector, marks the entry of the Gautam Adani group, which thus far has only been into power generation and transmission, into the distribution space. For Reliance Infra, the sale is a big boost to pare its debt which stood at over Rs 22,000 crore.

The deal was announced by the companies in December last year.

RInfra’s integrated power business includes the generation units based at Dahanu, transmission network across Mumbai and Maharashtra and the retail distribution network in Mumbai suburbs.

With this deal, Adani Transmission will have 35 grid substations with around 19,300 MVA of transformation capacity across the country, by the end of 2018 with a cumulative transmission network of around 12,540 circuit km, of which around 9,201 circuit km is operational.

The deal includes absorption of about 5,000 employees across three business areas of RInfra, said Anil Sardana, managing director and chief executive of Adani Transmission, and chairman of Adani Electricity Mumbai.

Adani Transmission, which is the largest private sector transmission and power distribution entity, said post-deal the company will be known as Adani Electricity Mumbai, which will be a subsidiary of Adani Transmission. It will serve over three million customers spread across 400 sq km in Mumbai.

Addressing the media to announce the completion of the deal, Ambani said, “With this deal, RInfra has managed to reduce its debt by 65 per cent from Rs 22,000 crore to Rs 7,500 crore. We intend to become debt-free by next year.”

Ambani further claimed that with a deal size of Rs 18,800 crore, this is the largest transaction in both infrastructure and power sectors. He also claimed that this deal marks the largest debt reduction in the infrastructure sector.

Ambani further said with this deal, the debt-equity ratio of RInfra will fall and just be in nominal 0.3:1, one of the lowest in the industry. It will bring down the annual interest cost by 70 per cent to Rs 800 crore from Rs 2,600 crore, he said.