Hero arm, Azure Power to raise $1 bn from bond sale

New Delhi | Bengaluru: Hero Group’s renewable energy arm and NYSE-listed Azure Power are gearing up to raise $1 billion by selling bonds to overseas investors over the next few weeks in separate offerings, according to people briefed on the matter. The Delhi-based green power rivals are looking to mop up $500 million each and have appointed investment banks to underwrite the offerings.
Hero Future Energies, led by Rahul Munjal, a nephew of Pawan Munjal, is reviving a plan that was shelved for two years. For Azure Power, it is the second such offering, after it raised $500 million two years ago.

The Munjal-led company raised $125 million from World Bank arm IFC in January 2017 and is in discussion with a consortium of investors to raise $200 million in equity funding, according to people in the know.

Hero is working with three global investment banks for the latest bond sale, while Azure has appointed HSBC, JPMorgan, Credit Suisse and Barclays. The two companies have a combination of wind and solar generation projects, though Azure leads in terms of installed capacity of rooftop solar plants.

Canadian pension fund, La Caisse de Dépôt et Placement du Québec (CDPQ), owns 40% in Azure Power and is one of its biggest institutional backers.

When contacted, Hero Group said the company does not comment on market speculation. “With the NBFC liquidity crisis and increase in local interest rates, we are seeing many of the renewable energy developers diversifying their sources of borrowing, making dollar bond issues attractive,” Vinay Rustagi, managing director at Bridge to India, a renewable energy consulting firm, said.

The top two renewable energy companies by generation capacity — Renew Power and Greenko — have collectively raised nearly $2 billion from bond sale to overseas investors over the past two years. Renew Power recently concluded a $375-million sale of green bonds.

“Indian issuers were neglected by international bond investors last year due to anticipation of higher interest rates in the US, leading to drying up of dollar bond issuances,” an executive with a global investment bank said on condition of anonymity. “But that has changed as interest rates in the US haven’t risen as expected.”

Hero plans to expand its green energy business to other parts of the world, specifically in South East Asia and Africa. It has an installed capacity to generate 1.2 GW of wind and solar power and is adding 500-700 MW to it.

Azure Power started predominantly as a solar energy provider but later added wind energy. Spread across 24 Indian states, the Azure projects have a capacity of 3GW. India’s installed renewable energy capacity amounts to about 20% of the country’s total power generation capacity. The government aims to double the renewable energy capacity by 2022.