Private equity giant Blackstone has picked up a minority stake in Delhi-based Moser Baer Projects Private Limited for Rs 1,350 crore ($300 million) that will help the privately held firm set up several power projects in India. Moser Baer Projects has been founded by Deepak Puri & Ratul Puri, the promoters of Moser Baer India Limited, the world's second-largest manufacturer of optical media.

Moser Baer relied on their long term legal counsels Luthra & Luthra. Senior Partner Mohit Saraf who has been advising Moser Baer for nearly a decade, led the transaction along with Senior Associate Shishir Vayttaden and Associate Vinay Kesari.

Desai & Diwanji represented Blackstone led by Partner Vishwang Desai.

Simpson Thacher & Barlett also joined the  PE giant. Hong Kong Partner Katie Sudol and Litigation Partners Mark Stein, Josh Levine advised Blackstone.

The VC Circle has reported the deal follows Blackstone's Rs. 275 crore ($60 million) investment for a 12.5 percent equity stake in Monnet Power Company, which is developing a 1,050 MW coal fired power plant. The deal is also the largest by the private equity major since it made its first investment in India in 2006.

Bar & Bench spoke to Mohit Saraf, Senior Partner, Luthra & Luthra on this transaction.

What were the nuances of this transaction?

Any investment in a greenfield (under, development) power project comes with a lot of uncertainties and a PE Fund by nature wants lots of these uncertainties removed, before they invest. This is the biggest challenge. If you look at all investments by PE Funds, they typically have not invested in a power project during its development stage. They enter at a more advanced stage. Getting a top-tier PE, like Blackstone to invest into a power project which is still under development and which is greenfield, is a pretty challenging job and therefore to find out and explain the risk issues, to draw a risk matrix, to eventually close a transaction in a record time was one of the important aspects of the transaction.

The transaction from start to finish took not more than 90 days. It was very stressful, particularly for the company and also for the lawyers to close it in such a short span of time. Moser Baer has been in the fore front in technology, but not power projects and therefore in a way it’s a new venture.  The biggest challenge was to mitigate the requirements of Blackstone and not compromise on Moser Baer and its promoters requirements.

Due Diligence in power projects

In any greenfield project, you require due diligence and particularly a power project is associated with a  lot of Governmental risks. Since Government agency, which is a utility company, is buying power, the due diligence covered other aspects of the utility company. Therefore in any of the power project investment, the due diligence also has to go on the credit worthiness of utility, which is the Himachal Pradesh Electricity Board in this case and their ability to pay. We had to examine the regulatory framework in Himachal, whether the power company has the ability to pay for power generated in the power plan. It was an extended due diligence and that’s what made the transaction exciting.

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