Hyderabad-based Gayatri Projects has decided to spin off their seven toll-road assets into a separate company which will be called Gayatri Highways. The new entity will be listed on the stock exchanges before the end of the current fiscal. Once listed, the existing shareholders of the parent company, Gayatri Projects, will be allotted shares on a 1:1 basis, that is, equity shareholders of Gayatri Projects holding one equity share will get one equity share in Gayatri Highways. Based on the same 1:1 share allotment, the promoters, including Gayatri Projects, will hold 61.15 % in Gayatri Highways. All the seven toll assets are currently operational and posted a cumulative annual revenue of Rs 356 crore at the end of FY17, and earnings before interest, tax, depreciation and amortisation (Ebitda) of Rs 273 crore.
Rajiv Reddy, vice-president, (operations), Gayatri Projects, told FE that the parent company is choosing an asset-light path and would focus on growing its market share in engineering, procurement and construction (EPC) contracts, across various sectors like roads, irrigation, industrial, railways, etc. He added, “Gayatri Highways is free to bid for road projects under the hybrid annuity model (HAM) and other asset-development projects, but will do so very prudently, only if we see healthy margins and low risk”.
The move to spin off the road assets into a new entity will also remove a debt burden of about Rs 2,500 crore on Gayatri Projects and provide investors with an option of investing either in EPC or in highway assets. The total consolidated debt of Gayatri Projects stood at Rs 4,056 crore at the end of FY17. Devam Modi, research director at Equirus Securities said the move to demerge the toll assets should lead to a re-rating of the EPC business. “However, the lenders to the toll projects need to give their approval as well for the demerger to go ahead. This should not be a severe challenge as Gayatri has a reasonably good portfolio and I expect a healthy traffic growth for these assets in the coming years,” he added.