Ruias-owned Essar Power today said its acquisition of Navabharat Power Pvt Ltd (NPPL) — one of the five companies raided by the CBI in connection with the coal block allocation scam — was “transparent” and NPPL was never its front company.
Stating that it had paid Rs 230 crore to acquire NPPL in two tranches in 2010 and 2011,three years after the company was allocated two coal mines in Odisha,Essar Power said it had “no dealing with either of the original promoters until this transaction”.
Essar Power “categorically denied” allegations that Navabharat was its ‘front’ company and asserted the deal was “legitimate”.
“Following the acquisition,Essar Power has invested more than Rs 500 crore in developing the project and has also achieved financial closure,with ICICI Bank having underwritten debt financing of more than Rs 3,720 crore,” the company said in a statement. “The project is currently awaiting certain government approvals,” it added.
In a separate statement,Navabharat Group said it had sold its 50 per cent in NPPL to Essar Power “in a transparent and diligent manner and full disclosures were made to the stock exchanges on July 13,2010 and April 20,2011”.
The sale,it said,followed Malaxmi Group – the other promoter in NPPL,selling its stake to Essar Power “in total disregard to the interest of the other investor” (Nava Bharat Group).
“…equity divestment (50 per cent in NPPL) was due to exigencies beyond the controls of the Nava Bharat Group and was in the best interest of its shareholders,” the Hyderabad-based firm said.
The “active management” of NPPL,including the pursuit of the coal block at the relevant time,was with Malaxmi Group-appointed Managing Director,it added.
Navabharat Power Pvt Ltd (NPPL),promoted originally by Hyderabad-based businessman P Trivikram Prasad and ex-CEO of Lanco Power,Y Harish Chandra Prasad,was allocated two coal blocks — Rampia and dip side of Rampia in Odisha– on January 17,2008.
In June,2006,it had signed an MoU with Odisha government for developing a 1050 MW mega power project in the state.
According to Essar,Rs 230 crore it paid was split between the then promoters,as per the agreements signed at the time of acquisition.
“This transaction was disclosed,as required by the regulations,in the prospectus issued by Essar Energy Plc in April 2010,the ultimate parent company of Essar Power Ltd.,India,” it said,adding that company’s investors have been kept updated about the progress made by NPPL.
The company further said the decision to acquire NPPL was taken after the Ruais-promoted firm was approached by a prominent Indian financial institution in 2009.
“Discussions with the merchant banker and the erstwhile promoters revealed that the power project of NPPL had made substantial progress with most of the key regulatory approvals in place,” Essar said.
It further said that “in comparison to a greenfield venture,Essar Power expected to save more than 2 years time in completing the project and accordingly went forward with the acquisition” of NPPL.
At that time,Essar Power was scouting for opportunities to expand its business through both organic and non-organic route,the company said,adding that the legal due diligence was done by J. Sagar & Associates,while Ernst & Young did the financial due diligence.
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