SBI led consortium of lenders to sell stake in Coastal energen

SBI has initiated process to sell troubled thermal power company Coastal Energen on sale as the company is struggling with debt issues. The company has 2*600 MW thermal power plant in Tamil Nadu and owed Rs 60 billion as of Dec,16.

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Why is this important?

Coastal Energen is part of Coal and Oil group. The lenders had earlier initiated strategic ddebt restructuring program in 2015 and had converted part of the company’s debt into equity which constituted ~51% share capital of the company. Of the 2 thermal power plants, Coastal Energen has signed PPA for one of the plant with Tamil Nadu state owned discom at tariff rate of Rs 4.69 per unit while for the second thermal plant the company does not have any signed PPA in place.

The proposed stake sale will help SBI in its plans to recover ~30000 cr of bad loans in FY19.

How stock to be impacted?

The news is positive for stock of SBI (CMP: Rs 276, M.cap: Rs 247077 cr, 1x FY20 P/BV).

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