Dispute Over One Day Commissioning Delay Causes 30% Solar Tariff Reduction in Karnataka

The Kolkata bench of the National Company Law Tribunal (NCLT) has approved the request made by Indian conglomerate Emami Group to demerge its solar power business (Emami Power) from the cement business (Emami Cement Limited).

The Emami Group had diversified into the renewable energy sector with a goal to achieve more than 300 MW of installed solar power capacity. Since then, the solar division has developed around 47 MW of solar power projects in the states of Karnataka, Gujarat, Tamil Nadu, and Uttarakhand.

In a proposal filed at the NCLT, the company expressed that by demerging the solar business, they will be able to strengthen their operations by increasing focus on each business individually. In addition, the company expects that this demerger will help them achieve economies of scale and allow faster decision making, subsequently reducing  operating efforts.

The NCLT has allowed all properties, rights, licenses, permissions and interest of the solar power division of Emami Cement to be transferred and vested in Emami Power, this includes a 10 MW solar power plant located in Santalpur, Patan, Gujarat and a 3 MW solar power plant located at Perunali, Kamuthi. All liabilities and duties of the solar power division of Emami Cement will also be transferred to Emami Power. Emami Power is now expected to issue and allot equity shares to the shareholders of Emami Cement.

In October 2018, Emami Cement had filed a draft red herring prospectus (DRHP) for an initial public offering amounting to ₹10 billion ($143 million). The company plans to utilise the net proceeds raised through the issue for repayment or prepayment of certain liabilities and general corporate purposes.

The Emami Group has businesses across a number of sectors such as FMCG, realty, retail, pharmaceuticals, bio diesel and manufacturing.

Similarly, in February 2018, the renewable energy business of Adani Enterprises was demerged into Adani Green Energy. The reason for the demerger was to provide greater focus on the growing renewable energy business which is capable of attracting a different set of investors, strategic partners, lenders and other stakeholders. The demerger was also expected to provide a scope for independent collaboration and expansion.

Shaurya Bajaj is a staff reporter for Mercomindia.com.