Sarda Energy shares gained 8% on Friday, February 27, following the Supreme Court's dismissal of appeals by unsuccessful bidders in the SKS Power acquisition case. According to CNBC TV18, the stock hit an intraday high of ₹561 per share and was trading up 6.4% at ₹551.95 around 1:10 pm. The stock has gained 15.8% in the past month, reflecting strong investor confidence in the resolution plan's final approval. However, recent analyst sentiment appears divided, with price targets ranging between ₹500 and ₹620 and some advocating for a 'Hold' rating, emphasizing the need to balance acquisition benefits against current financial performance headwinds.
The Supreme Court on Friday upheld the resolution plan of Sarda Energy & Minerals Ltd for SKS Power Generation (Chhattisgarh) Ltd, while simultaneously warning unsuccessful bidders against challenging commercial decisions made by lenders. A bench led by Justice B.V. Nagarathna made these observations while dismissing appeals filed by Torrent Power Ltd, Jindal Power Ltd and Singapore-based Vantage Point Asset Management, which had challenged the approval of the plan. The Supreme Court stated that once the Committee of Creditors (CoC) approves a resolution plan and it receives clearance from the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), courts should not interfere unless there is a clear legal violation. Since Sarda's plan was already approved and implemented, the Supreme Court found no merit in the appeals.
The ₹19.50 billion acquisition of SKS Power is strategically important as it strengthens Sarda Energy's position in the power generation sector. SKS Power operates a 4x300 MW coal-based thermal power plant in Chhattisgarh, which significantly enhances Sarda's energy capabilities. The resolution plan also addressed nearly all debts of the financial creditors, signalling financial closure and stability around the asset. Sarda Energy plans to boost its energy business by expanding SKS Power's operations and increasing overall generation capacity, with the company also working on bringing new hydro power assets online and setting up a 50 MW captive solar plant in Chhattisgarh, expected to be operational in the first quarter of FY27.
The dispute originated on 1 October 2024, when the NCLAT upheld the approval of Sarda Energy's ₹1,950-crore bid to acquire SKS Power and rejected objections raised by multiple parties. According to Mint, the Mumbai bench of the NCLT had admitted a plea filed by Bank of Baroda in April 2022 to initiate insolvency proceedings against SKS Power after admitted claims of about ₹2,560 crore. On 13 August 2024, the NCLT approved Sarda Energy's resolution plan, which covered nearly the entire amount of financial creditors' dues. The SKS Power acquisition is expected to reduce the cyclicality in business for Sarda Energy, providing greater operational stability despite current margin compression concerns.
As reported by CNBC TV18, SKS Power operates a 600 MW thermal power plant at Binjkote and Durramuda in Raigarh district of Chhattisgarh. Sarda Energy & Minerals, founded in 1973 and headquartered in Chhattisgarh, is the flagship company of the Sarda Group and is among India's lowest-cost steel producers and one of the country's largest manufacturers and exporters of ferroalloys. However, the company reported weak earnings in the third quarter, with net profit declining 3.55% to ₹190.4 crore from ₹197.4 crore in the previous year, while revenue was down 3.3% at ₹1,276 crore from ₹1,319 crore. EBITDA declined 15.7% to ₹310.8 crore from ₹368.7 crore, with margins contracting to 24.36% from 27.95% in the year-ago period. The company's current market capitalization hovers around ₹18,500 crore, with its Price-to-Earnings ratio estimated between 12.5x and 18x.
