<div>Given the general despondency in the power sector in India over the past couple of years and the multiple attempts by Jaiprakash Associates to raise money, the Rs 950-crore qualified institutional placement (QIP) of shares by its subsidiary, Jaiprakash Power Ventures, was no mean feat. <br /><br />Facilitated by Credit Suisse, the QIP, a sub-category under the head ‘institutional equity placement’, is the largest in the power sector in four years. It opened on 19 February 2013 and closed on 22 February, with a minimum impact on the company’s scrip. Suren Jain, MD and CFO, says the company chose the QIP route over a public issue or any other mode of raising funds, due to the interest shown by institutions and also because a public issue is a long-drawn process and tends to impact the stock. <br /><br />According to Jain, the money raised from the QIP was used as equity in the Nigrie thermal power project (2 x 660 MW) in Madhya Pradesh and the Bara thermal project (3 x 660 MW) in Uttar Pradesh. Jain believes the deal reinforces faith in the power sector and demonstrates that “companies that deliver can raise money even in difficult times”. <br /><br />While admitting that fuel security and policy limbo issues were impacting Jaiprakash Power’s project execution capabilities, Jain expressed confidence that the company would grow exponentially, given that the country remains power deficient. <br /><br />Prior to the QIP, Jaiprakash Power had raised funds in 2010 and 2011, using a mix of options — offer for sale, convertible bonds and an initial public offer. This time around, before settling on Credit Suisse, the power company was in talks with a number of banks. Fund estimates promised by most banks ranged between $100 and $135 million. Once the Swiss financiers were brought in, they chose to go to the market with a larger deal size, using it as a form of assurance to investors that Jaiprakash Power would not return to the market anytime soon to either liquidate assets or raise more money. <br /> <br />Jaiprakash Power’s QIP fared better than its peers in the power sector largely on account of its existing hydropower capacity — 1,800 MW at the time, says Credit Suisse. Another point working in its favour were the captive mines for its Madhya Pradesh project. <br /><br />Credit Suisse turned the three main challenges of the power sector — fuel security, long gestation period and the funding gap/strained cash flow — to Jaiprakash Power’s advantage. “These (challenges) were our main focus areas when working out the QIP,” explains Sumit Jalan, head of the Indian equity capital market business at Credit Suisse. The company’s hydropower projects and captive mines helped the bank increase the deal size and set investors’ doubts at rest. <br /> <br />On recent reports of Jaiprakash Power selling two hydropower plants in Himachal Pradesh, Jain, while rubbishing them, says the company is in the process of creating assets.<br /><br />(This story was published in BW | Businessworld Issue Dated 24-03-2014)<br /> </div>
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