Morgan Stanley-led group takes 44-per cent stake in Asian Genco

A group of investors led by Morgan Stanley Infrastructure Partners, has a taken a 44-per cent stake in power generation and engineering services firm Asian Genco for $425 million.

This is the biggest private equity transaction in India in almost two years, which according to analysts signals the easing of the slowdown in large deals. The deal also comes as the biggest private equity transaction in the country's power sector and is the first $300 million plus deal since 2008.

The last PE deal of comparable size was Providence Equity Partners' investment of $428 million in Aditya Birla Telecom in 2008 (See: Providence invests Rs2,700 crore in Idea Cellular subsidiary Aditya Birla Telecom). 

The investment will be effected through convertible instruments that would give the investors around 44 per cent in the Singapore-based Asian Genco - a holding company that owns many hydro, thermal and non-conventional power generation assets in India - when converted into equity. The group of investors, besides Morgan Stanley, includes Everstone Capital, General Atlantic, Goldman Sachs Investment Management and Norwest Venture Partners and others.

Private equity firms had kept away from making big investments in Indian firms due to the slowdown and a sharp correction in valuations. Last year's biggest transaction involved buyout giant KKR along with CPP Investment Board taking a increasing stake in Aricent, formerly Flextronics Software in a deal that was worth only around $255 million.

The Asian Genco deal comes in the wake several new power sector firms raising funds to put up generation units to cater to the demands the second-fastest growing economy in the world.