The Capital Quest | Ontario Teachers’ backs Mahindra’s renewable energy business

The Capital Quest | Ontario Teachers’ backs Mahindra’s renewable energy business

Ontario Teachers’ Pension Plan Board has struck its fifth major investment in the country over the last 12 months, by inking an agreement to pick a stake in Mahindra Group’s renewable energy business.

Ontario Teachers’ will acquire a 30% equity stake in Mahindra Susten Pvt Ltd for Rs 711 crore ($90 million), valuing the company at Rs 2,371 crore ($300 million), it said Sunday.

The proposed transaction also envisages the setting up of an Infrastructure Investment Trust (InvIT), which will initially comprise renewable power assets seeded by Mahindra Susten with operational capacity of around 1.54 GWp. As part of the proposed transaction, shareholder loans of Rs 575 crore ($73 million) advanced by Mahindra Group to Mahindra Susten will be repaid.

As a result of this transaction, Mahindra Group will receive an inflow of approximately Rs 1,300 crore ($165 million). Mahindra Group and Ontario Teachers’ will jointly explore the sale of an additional 9.99% stake in Mahindra Susten by May 31, 2023. Mahindra Group will deploy these funds, plus an incremental amount of up to Rs 1,750 crore ($220 million), into the business and InvIT over the next seven years.

Over the same period, Ontario Teachers’ has committed to deploy an additional amount of up to Rs 3,550 crore ($450 million) into the business and the InvIT.

Deepak Thakur, Managing Director & Chief Executive Officer, Mahindra Susten said: “This partnership with Ontario Teachers’ syncs with Mahindra Susten’s plan to substantially grow our green energy portfolio across solar PV, wind, and energy storage.”

Chris Ireland, Senior Managing Director, Greenfield Investments & Renewables, Infrastructure & Natural Resources at Ontario Teachers’, said: “We believe the renewable energy sector in India is poised for significant growth in the coming years as India works towards its ambitious clean energy goals, and are excited to partner with the Mahindra Group in this initiative.”

Ontario Teachers’ acquisition of a 30% shareholding in Mahindra Susten is expected to complete by December. The InvIT is expected to be formed during the next financial year.

Avendus Capital acted as financial advisor and Khaitan & Co. acted as legal advisor to the Mahindra Group for the transaction. Ambit acted as financial advisor and Cyril Amarchand Mangaldas acted as legal advisor to Ontario Teachers’ for the transaction.

This comes just weeks after Ontario Teachers’ struck its maiden control deal in India by signing an agreement to buy a significant majority stake in Sahyadri Hospitals Group, the largest private hospital chain in India’s Maharashtra state, from private equity firm Everstone.

Earlier this year, Ontario Teachers’ said it would invest up to $175 million in KKR’s India road platform. This road platform comprises a portfolio of 12 assets, including six that are proposed to be acquired as per definitive agreements that have been signed. This includes a mix of toll and annuity roads, with a total length of 910 kilometres across 11 states, including Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu and West Bengal.

Previously, Canada Pension Plan Investment Board and OTPP bet $200 million each on Indian toll road assets. The two pension funds picked up a 25% stake each in an infrastructure investment trust (InvIT) sponsored by the state-run National Highways Authority of India (NHAI).

This InvIT owns, operates and maintains a portfolio of five toll roads in the states of Gujarat, Rajasthan, Telangana and Karnataka, spanning a total length of 390 km and a concession period of 30 years.

Ontario Teachers’, which had net assets of C$242.5 billion as of June 30, is also an anchor investor in the National Investment and Infrastructure Fund (NIIF), a quasi-sovereign fund of the Indian government.

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