MSEDCL needs to become leaner before IPO and spin off agriculture sector by April; aims to list by the end of 2026

Maharashtra State Electricity Distribution Company plans to complete the demerger of its agriculture arm by April, a major step ahead of its planned December initial public offering, a top official said.“We are targeting an IPO by December for MSEDCL (Maharashtra State Electricity Distribution Company), and for that we will spin off our agriculture business, which we aim to complete by April,” Chairman and Managing Director Lokesh Chandra told PTI on the sidelines of Mumbai Climate Week.

The agriculture segment will be split as a separate company and not a subsidiary so that the liabilities do not remain on the balance sheet of the core distribution company, Chandra said.MSEDCL contributes a total dues of about Rs 96,000 crore, of which nearly Rs 76,000 crore relates to unpaid agricultural consumption, he said.

The accumulation of these arrears has led to higher working capital borrowings and financial pressure, despite the core distribution business being operationally viable, Chandra added.

Post the demerger in April, the remaining entity will retain a debt of around Rs 20,000 crore, which the company considers sustainable, he added.

Post-carve-out, the company will undertake a balance sheet restructuring and debt restructuring before launching the IPO process. The listing should be completed by December this year, Chandra said. The government plans to dilute up to 10 percent stake in the company through the IPO, he said, adding that proceeds from the IPO are likely to be used for capital expenditure in transmission and distribution infrastructure.

Maharashtra Chief Minister Devendra Fadnavis had announced that the state plans to list the power companies, including MSEDCL, and also the generation and transmission arms by December 2025. He hinted that the process will begin with the listing of the transmission company in 2026.

Chandra said discussions are on with the state government to address the agriculture-related payment arrears. Once resolved, the restructuring is expected to strengthen financials and improve valuation prospects at the time of listing.

The company expects to save nearly Rs 66,000 crore in energy procurement costs over the next five years through a strategic shift to renewable energy, supported by optimal storage planning.

The utility has redesigned its resource adequacy and energy procurement plan to increase the share of renewables to 52 percent from about 15 percent currently, while carefully balancing solar, wind and storage capacity, he said.