Eyebrow raised over CESE acquisition

Kolkata-based private sector power major CESC Ltd has acquired an IT-BPO company, Firstsource Solutions Ltd (FSL), last week.  Many thought of it as an investment of the $2- billion RP-Sanjiv Goenka group.

On the one hand, CESC generates Rs 400 crore (the acquisition cost of FSL) of cash in just 5 months. The company is run at a healthy debt-equity of 0.5:1. Taking into considering heavy financing in two upcoming projects (through SPVs), the aggregate debt-equity of the group’s power business is an impressive 1.1:1. 

On the other hand, the group is forced to hold back its plan to invest in power sector. The problem of plenty may only increase with acquisition of a profit making FSL and, the improving fundamentals of Spencer’s. Listing of the retail arm may also bring home more cash.