Sembcorp Industries to raise $380 mn from asset sales, plans India energy IPO

Singapore: Singapore’s Sembcorp Industries said on Friday it expects to raise about $380 million from the sale of some utilities assets and plans to list its Indian energy business, as it reported a plunge in quarterly profit.

The industrial conglomerate, which has been conducting a strategic review of its business, said it has begun the process for an initial public offering (IPO) of the Indian unit, Sembcorp Energy India Ltd.

It expected the divestments of peripheral utilities assets to provide cash proceeds of up to S$500 million ($380 million) over the next two years, not including the potential proceeds from the proposed India IPO.

Sembcorp has filed a draft preliminary prospectus for the listing on BSE Ltd and the National Stock Exchange of India.

“I think they are making the right move. They will definitely be able to unlock cash from their divestment of assets and the IPO,” said Joel Ng, an analyst with KGI Securities.

The company, the biggest shareholder in rig-builder Sembcorp Marine, reported a net profit of S$22.8 million for the fourth quarter, a drop of 85% from the same period a year ago.

Shares of Sembcorp Marine fell 4.7% on Friday, extending Thursday’s 11% slump – their biggest two-day percentage fall in a decade. The company had turned in poorer-than-expected results earlier this week.

Sembcorp Industries’ review, which began last year, had prompted market talk of a potential privatisation or divestment of Sembcorp Marine, according to analysts.

The market was likely disappointed that its parent’s review did not include any action related to Sembcorp Marine, KGI’s Ng said.

Neil McGregor, Sembcorp Industries’ CEO, said the company was confident that Sembcorp Marine was well-positioned to benefit from offshore and marine industry’s recovery, said.

“We will continue to support the business through the cycle,” he said.

The company said its utilities business will now focus on four key markets, Singapore and Southeast Asia, China, India and the UK.

Sembcorp industries, which set a target of doubling its renewables portfolio to about 4,000 megawatts by 2022, also said it had entered into a conditional agreement to divest its municipal water operations in South Africa.

Singapore state investor Temasek is the biggest shareholder in Sembcorp Industries.

Axis Capital, Credit Suisse, CLSA and SBI Capital Markets are the global coordinators for the India IPO. The four firms and IndusInd Bank are the book running lead managers for the issue.

Sembcorp Industries’ shares were trading 1.5% lower on Friday morning, while the broader market was up 0.8%livemint