Sprng deal could deliver fresh spark to drive Grasim revenue

ET Intelligence Group: Grasim Industries‘ acquisition of Sprng Energy is a strategic bet on India’s fast growing solar power sector, which is expected to help its renewable energy business outpace the group’s overall revenue growth. Revenue of renewable energy business is estimated to surge 382% to ₹4,446 crore by FY28, compared with a 31% anticipated increase in the group’s consolidated revenue at ₹53,736 crore, according to Motilal Oswal Financial Services. Analysts estimate the segment currently generates around ₹900 crore in annual revenue, accounting for about 2% of the group’s revenue. Its share is expected to rise to around 8% by FY28.

The company’s renewable business has been showing momentum, with year-on-year 60% growth in revenue at ₹251 crore and 55% growth in operating profit before depreciation and amortisation (Ebitda) at ₹199 crore.

Building materials remains Grasim’s largest business. With ₹1 lakh crore in revenue, the division contributed 58% to FY26 revenue. Financial services, the second largest segment, contributed 26% while cellulosic fibres accounted for 10% of revenue. The remaining 6% share was of chemicals segment.

The implied acquisition cost of ₹17,200 crore for a five giga watt (GW) capacity is below the current investment required to develop a comparable greenfield solar project. This translates into an implied valuation of about ₹3.4 crore per mega watt (MW). The portfolio comprises of around 3.3 GW of operational assets and 1.7 GW capacity under construction. According to the industry estimates, a greenfield solar power project in India currently costs around ₹4 crore to ₹5.5 crore per MW, implying that Grasim has acquired Sprng’s portfolio at a discount.

However, the acquisition is expected to increase the financing burden. Since the deal will be funded through a mix of debt and equity, interest costs are likely to rise, which may weigh on near-term profitability. However, Grasim’s leverage remains moderate, with a debt-to-equity ratio of 0.3 (excluding borrowings related to its financial services business) and net debt of ₹36,915 crore at the end of FY26. This indicates the company has sufficient balance sheet capacity to absorb the additional debt.

According to Motilal Oswal Financial Services, the acquisition is likely to be largely debt funded, with Grasim’s equity contribution estimated at around ₹2,430 crore. The higher borrowing costs may reduce the company’s standalone FY28 earnings per share (EPS) estimates by about 8%.