GMR Infra may raise R800 cr via road asset sales

Written by Shubhra Tandon | Mumbai | Updated: Jul 30 2013, 06:33am hrs
GMR Infrastructure is expected to garner close to R800 crore by way of sale of two road assets in Andhra Pradesh and Tamil Nadu, respectively, according to industry sources. While SBI Macquarie is understood to be in advanced stages of due diligence for picking up stakes in the two road projects, sources say Morgan Stanley Infrastructure Fund has also looked at the two assets.

The two projects on the block include an annuity project Adloor Yella-reddyGundla Pochanpalli in Andhra and a toll project Tindivanam-Ulundurpet in TN.

GMR Ulundurpet is a 292-km stretch between Tindivanam and Ulundurpet on NH-45, which commenced commercial operations in July 2009. GMR Pochanpalli, a 412-km road project between Adloor-Yellareddy and Gundla Pochanpalli on NH7, commenced commercial operations in March 2009. Both projects have a concession period of 20 years.

The asking price from GMR for both the projects put together is about R800 crore for a 100% stake sale, said an industry source. The company, however, may be allowed to divest up to 74% stake in the project according to NHAi regulations. At those levels, the deal may work out to be close to R600 crore, said a source.

In an e-mailed response, a GMR spokesperson said, As company policy, we do not comment on speculative news.

According to two industry sources, at the time of its investments in GMR Jadcherla Expressways, SBI Macquarie had looked at these two road assets as well. In February, GMR Highways divested 74% stake in Farukhnagar-Jadcherla highway in Andhra Pradesh to SBI Macquarie Infrastructure Investments and SBI Macquarie Infrastructure Trust for a total of R206 crore, a 40% increase from its investment of R146 crore in the project.

The deal for the Ulundurpet and Pochanpalli projects fell through over valuations, but SBI Macquarie decided to go with at least one project at that time. They have now come again with fresh valuations for the other two, says a source in know of the development. As for Morgan Stanley, sources say it remains unclear if the projects fit their investment profile.

SBI Macquarie and Morgan Stanley declined to comment for the story.

The originally R800-crore Ulundurpet project saw a cost escalation of about R90 crore during construction, taking the project cost close to R890 crore, say sources. GMRs equity investment in the project is close to R291 crore, and the project has a term loan of about R596 crore, said the source. The toll collected on the project is about R203 crore in the financial year 2011-2012, he said.

In the Pochanpalli project, the company is understood to have an equity investment of R140 crore while the annuity income is R108 crore.

These asset sales form a part of GMR's asset light strategy aimed at reducing high debt and having a leaner balance sheet. The company's debt as on March 31, 2013 was over R33,700 crore. "Its recent asset sale programme has been decent as these large assets have attracted better valuations than we expected. Of the companys plans to sell R100 billion (R10,000 crore) of its debt, we feel the easy part is over as it has disposed of R43 billion (R4,300 crore) while other asset sales may take time and valuations could be unfavourable. The challenge will be to service the holding companys debt of R63 billion (R6,300 crore). Equity requirements for new projects (R18 billion) are within reach," observed foreign brokerage CIMB in a June 3, 2013 report.