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Nikkei Markets

Sembcorp could delay India energy IPO due to market conditions

Offshore arm continues to weigh on profits in last quarter

Sembcorp says the conditions facing its offshore and marine operations remain challenging.    © Reuters

SINGAPORE (Nikkei Markets) -- An initial public offering of Sembcorp Industries' Indian wind and thermal energy generating business that was flagged a year ago is unlikely to take place anytime soon, although the conglomerate continues to monitor market conditions in the South Asian country.

"We are not going to sell India ... when the market won't give us value," CEO Neil McGregor said at a media briefing. "Timing is important for us."

He added that the outlook for the Indian energy business has improved in recent months due to firmer prices but acknowledged the potential for volatility from upcoming general elections in May.

Indian equity markets have had a lackluster year so far, damped by concerns about the elections and the prospect of a growth slowdown.

Sembcorp, whose biggest shareholder is Singapore state investor Temasek Holdings, said in February last year that it had begun the process of listing Sembcorp Energy India on the Bombay and National stock exchanges as part of a plan to reduce debt and raise funds for its other businesses.

The Singapore firm received the green light from Indian regulators in August, and the IPO had been slated for the second quarter of this year. Indian media reports had previously estimated that the Sembcorp Energy India IPO could be worth more than $500 million.

The company's latest quarterly results showed that the Indian energy operations, which is part of the utilities group, have begun to turn a profit.

Sembcorp Energy India's recent successes include an agreement to supply 250 megawatts of electricity to Bangladesh for 15 years beginning February as well as a preliminary agreement, subject to regulatory approval, to supply 500MW of power to the Indian state of Andhra Pradesh for eight years.

Although Sembcorp's utilities and urban development arms posted better performances in the fourth quarter, they were offset by losses at its large offshore and marine arm, resulting in a 10% fall in net profit for the fourth quarter. Sembcorp is the parent of Sembcorp Marine, the world's second-largest rig-builder.

Looking ahead, the company said the outlook for offshore and marine is challenging as the industry remained in a down cycle.

"Offshore rig orders will take some time to recover as the market remains oversupplied," Sembcorp said.

However, it expects steady performance from its utility businesses and continued growth in profits from urban development.

In all, the company earned 106 million Singapore dollars ($78.4 million) in the three months ended December, down from S$118 million in the same period a year ago. The results were better than the consensus estimate of S$81.90 million from analysts polled by Refinitiv.

For the full year ended December, Sembcorp made a net profit of S$347 million, a drop of 9% from 2017.

Sembcorp said net profit from its utilities business more than doubled to S$312 million last year as the operations in India turned a profit of S$47 million compared with a loss of S$58 million in 2017.

The urban development business turned in a record net profit of S$86 million, an increase of 4% that was driven mainly by land sales in Vietnam and China. The marine business recorded a net loss of S$48 million as compared to a net profit of S$157 million in 2017.

--Kevin Lim

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