GMR Group adopts 'Asset Light' model strategy

Nov 15 2012, 18:58 IST
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SummaryGMR Group, one of the fastest growing infrastructure enterprises in the country, today said it has adopted strategy of 'Asset Light' model to build upon its advantage of the expertise it has developed over the years to shore up its revenues and improve business.

GMR Group, one of the fastest growing infrastructure enterprises in the country, today said it has adopted strategy of 'Asset Light' model to build upon its advantage of the expertise it has developed over the years to shore up its revenues and improve business.

"Considering the group's commitment towards value creation, we have adopted strategy of Asset Light model which will build upon our advantage of the expertise we have developed over the years to shore up our revenues and improve business," GMR Group Chief Financial Officer A Subba Rao told reporters here.

Rao said Asset Light strategy is in two forms and the existing asset perhaps will go through dilution which will release the cash and give leverage to the balance sheet.

Asked in which sectors the company is kicking off the Asset Light strategy, Rao said he would not be able to comment on those projects and verticals as of now because that is not conducive to the process that is going on.

However, in the next two-three months time the company should start seeing the results of the endeavour, Rao said, adding, any process of this kind will reasonably take six to twelve months time to complete the entire process.

Rao said the infrastructure sector, particularly power sector is going through toughest of times for now. "I have never seen such kind of a situation in the power sector in last 13 years," he said.

The power sector has been posing several challenges. The significant capacities were available for generation of power and revenues, but unfortunately the company was not able to put them to use because of the non-availability of the gas.

"A drastic drop in the output of gas from KG basin has affected its plants on the East coast," he said.

"The power sector has been plagued with issues on gas availability due to which our plants also suffered. Right from the fuel (natural gas and coal) availability to discounts, distribution and realisation of receivables for the power supplied has affected us," he said.

Coupled with non-availability of gas, the capital market has been posing lot of challenges in terms of the ability to raise capital in the given business environment, Rao said.

"To fund the equity we had to borrow loans in lieu of the equity which also has put additional burden on our balance sheet," he said.

The net consolidated loss of the group, which builds airports, power projects and major roads in the country and abroad, had mounted to Rs 179 crore for the second quarter ended September 30.

Rao said the company believed that gas would be available shortly to the government initiative of price-pulling mechanism. "Once that is available I think the situation will improve," he said.

Responding to a query, GMR CFO (Airports) Siddharth Kapur said the company's outstanding from Kingfisher is almost Rs 64 crore.

"Out of Rs 64 crore only about Rs 20 crore is due on revenue account. There are overdues that needs to be settled. Of course now we have to figure out a way to get this money out of Kingfisher," he said.

Kapur added airport sector however is performing well, except Sabiha Airport in Istanbul, Turkey. "The three remaining airports run by the company (Delhi, Hyderabad and Istanbul main airport) and road projects are doing well," he said.

The company said higher revenues from the operation of airports during the quarter aided by the revised tariff and UDF charges at Delhi International Airport resulted in significant improvement in the turnover.

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