For renewable projects, the going may not be as tough with funds that have a green mandate showing interest. “There is still interest from funds, like pension and others, who have long-term investment plans and continue to look for opportunities in investing in infrastructure assets. Some of these also have a green mandate and would want to invest in renewable projects,” said Deepto Roy, partner, Shardul Amarchand Mangaldas.
Nonetheless, renewable projects have been unable to find buyers and large scale investors lately. Slow growth in capacity addition and frequent policy changes has made the investors wary of the Indian renewable energy sector.
There is consensus the trend will continue with companies –domestic and foreign-shying away from inorganic expansion across sectors including renewable. "We expect corporates less active for inorganic acquisitions, compared to the funds led by sovereign wealth and pension funds,” said Rahul Prithiani, Director, Crisil Research.
Barring private equity
investors and few pension funds, no global energy company has invested in Indian renewable space in recent times. French energy major Engie left the Indian market while Spanish wind turbine maker Gamesa (now Siemens Gamesa) has shifted its focus from bidding for wind power projects to being an EPC company in India. A similar trend is playing out for the road sector with PE firms picking large interests in operational roads.
“Deals will take time to get finalized as a private investor, needs to visit the site and verify the asset. However, people are interested and there is enough capital in the market, preliminary discussions continue across the board,” said a senior official from a private equity
fund with significant exposure to the Indian infrastructure segment.
Difficulty in finding credit facilities may also push renewable energy firms to look for equity partners. "Banks and domestic financiers will now be more cautious in lending to the renewable energy companies. PE investor cycle is barely five years. Long-term domestic financing is still missing for Indian Renewable energy players," said the chief executive officer of a Delhi-based renewable energy company.
The same holds true for road companies, which were already in the market before Covid-19 owing to high debt concerns. "Most of those were already struggling, we see more aggression in selling those assets now," added a sector expert.