Potential India IPO could seal recovery for Sembcorp Industries

It could boost about $100m to $200m gains for the firm.

Sembcorp Energy India Limited’s (SEIL) potential initial public offering (IPO) could bolster profits for Sembcorp Industries’ India operations, DBS Equity Research and OCBC Investment Research (OIR) said.

DBS thinks that the potential IPO could boost about $100m to $200m gains for SEIL.

“The power market in India is recovering with narrower oversupply in the market and higher tariff,” DBS noted. “This should swing the India operations to profit in 2018.”

The bank mentioned that SEIL operates 3,567MW power capacity which includes 2,640MW of thermal power and 927MW of renewable capacity by late 2017. Moreover, it has been awarded an additional 800MW of wind capacity since and its management looks to grow renewable capacity in India by 300-500MW p.a.

Aside from the target IPO launch, OIR believes that the group stepped up to reposition its utility business and its integrated energy platforms in H1 through its acquisition of UK’s largest flexible distributed energy player. In addition, it entered the Australian renewable market.

“The group also continued to build its presence in Singapore’s solar market, and extended its gas business with liquefied natural gas (LNG) importation,” OIR commented.

OIR further mentioned that Sembcorp Industries, along with Keppel are reportedly amongst parties to study bids for Hyflux’s Tuaspring plant.

The firm’s profits dropped by 7.9% to $158.57m from $172.11m last year despite a revenue increase of 38.6% to $6.1b from $4.4b last year.