DE Shaw is expected to make a follow-on investment of $5 million in Soham Renewable Energy Pvt Ltd as the Bangalore based power firm is set to clinch the latest round of Rs 90-crore fundraising in which clean energy fund FE Clean is also participating, sources tracking the development said.
FE Clean will invest Rs 65 crore along with existing investor DE Shaw. Soham was scheduled to close the fund raising during the first quarter of 2010, but the process dragged on as discussions with DE Shaw remained inconclusive. The NYC-based global investment firm, with over $21 billion under management, had infused $15 million in 2008, and holds around 25% stake in Soham.
In the wake of the follow-on deal, DE Shaw may also be postponing its exit from the company, which was originally scheduled for 2011. "It may now get pushed back to 2014," said one source familiar with the matter.
"The talks are still on and hence it will be improper for me to comment.But the fact of the matter is that the December 2009 fundraise did not close," Sanjith S Shetty, Vice Chairman of Soham Renewable Energy told VCCircle. The valuation details of the latest fundraising and possible changes in the agreement clauses with DE Shaw could not be ascertained.
It is unclear what caused the delay in clinching the fundraise, especially the transaction involving DE Shaw. Soham was one of the portfolio firms for which DE Shaw had extended a bigger equity credit-line at the time of the initial investment about three years ago. This funding was to chase M&A opportunities to build a larger platform, but this does not seem to have happened.
FE Clean, which is now becoming a shareholder at the entity level, is already an investor in one of hydel power SPVs of Soham. It holds 20% stake in Ambuthirtha Power (P) Ltd.
Meanwhile, sources also said that Soham Renewable, which is promoted by former Vijaya Bank chairman and MD Sadanada Shetty, may look to buy the stake of Praxair India in its Ambuthirtha Power project. Praxair Inc, one of the largest industrial gases company in the world, holds a 26% stake in the project.
The promoters of Soham have evinced interest to buy out Praxair but there is no formal process underway regarding this. "With regards to buying out Praxair's stake, nothing is on the cards today. But whenever an investor wants to exit, its our duty to return them by honoring return commitments to them," Shetty added in response to VCCircle queries.
Interestingly, Praxair India is also Ambuthirtha Power's captive customer, according to a recent ICRA release. Praxair's 26% shareholding in this project also has a clause by which the Ambuthirtha Power has to pay a Rs 3.5 crore dividend to the firm from FY10 onwards, which may result in some financial risks for the company, said the ICRA statement. Further, Soham also wanted to expand the scope of the subsidiary beyond that of a captive to Praxair.
Another one of the projects already commissioned by the company is 15 MW Soham Mannapitlu Power Private Limited, which is also located in Karnataka.
Besides these two plants, Soham Renewable is working on a portfolio of hydel assets with a total installed capacity of over 100 MW. For this, the company plans an investment of Rs 700 crore in the small hydro segment in Karnataka through debt and equity. VCCircle reported earlier this week that Amrit Jal Ventures, the holding company of Hyderabad-based Gati Group's hydel power projects, is looking to divest around 26% stake for raising Rs 200-250 crore.