JSW Energy Ltd shares climbed over 8% in intraday trade on Tuesday after the company announced that it will acquire GMR’s Kamalanga power project in Odisha for Rs 5,321 crore.
At 12:08 pm, shares of JSW Energy were trading at Rs 65.90, up 4.4%, after hitting the day’s high of Rs 68.40. The stock’s performance has been flat in the last one year, inching up just 2% during the period compared with an over 13% rise in the benchmark Nifty 50 index.
JSW Energy in a notification to stock exchanges on Monday said it had entered into a share purchase agreement with GMR Energy for acquiring 100% stake in the latter’s subsidiary GMR Kamalanga Energy. After the acquisition, the total installed power generation capacity of the company will increase to 5,609 MW, with GMR’s Kamalanga power project contributing nearly 1,050 MW to the total.
The acquisition will expand JSW Energy’s presence in the eastern region of the country and further diversify its fuel mix and off-take arrangements, the company said in the notification.
After the acquisition, brokerage firm CLSA maintained its ‘buy’ call on the JSW Energy stock with a target price of Rs 85 per share. It said the company was on track for profitable growth with its target to double its capacity over 3-5 years.
JSW Energy has acquired GMR Kamalanga at a 20% discount to its replacement cost, though it could have acquired it cheaper if it had waited, noted CLSA.
The acquisition adds 23% to its capacity and 28% to its FY21 EBITDA (earnings before interest, tax, depreciation and amortization). The acquired plant should be RoE-accretive from year one and is a play on private sector consolidation with an eye on profitability, said CLSA.
Motilal Oswal also said it sees the transaction as value-accretive for the company, given the strategic location of the plant, room for merchant volumes, and the company’s ability to reduce interest and O&M (operations and maintenance) costs after the acquisition.
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