MUMBAI: GMR InfrastructureBSE 0.46 % is in talks with potential investors such as Morgan Stanley Infrastructure Fund, CitigroupVenture Capital, SBI Macquarie and ICICI Venture to divest stake in four toll road assets and raise about Rs 1,800 crore to cut debt. The infrastructure company, which builds airports, power projects and roads, has received expressions of interest (EoIs) from these prospective investors, said three senior industry official close to the transaction.
"The funds are expected to start due diligence of the road assets shortly and complete the stake purchase in six months. The assets are not offered as one block," said one of the officials. Arun Bhagat, a Bangalore-based spokesperson for GMR, said: "As a company policy, we are unable to comment on price-sensitive information and speculative news." Spokespersons of Morgan Stanley Infra Fund, Citigroup Venture Capital, SBI Macquarie and ICICI Venture did not respond to e-mail queries from ET. GMR kicked off the divestment process in its highway business in April this year by approaching select investors with a proposal seeking to sell 67-76% stake in four different assets close on the heels of its divestment of majority stake in Jadcherla Expressways to SBI Macquarie in February 2013.
Pochenpalli Expressways, Ulundurpet Expressways, Hyderabad-Vijaywada and Hungund Hospet are the assets which are offered for sale. GMR had invested about 900 crore in the four assets. It has nine road assets, out of which eight are operational. The Bangalore-based Group has recently sold 70% stake in Jadcherla Expressways for Rs 206 crore, translating into a 40% increase in its investment. Considering this as a benchmark, the company would raise Rs 1,260 crore by selling stakes in four toll road assets.
"Projects like Hyderabad-Vijaywada would fetch better valuation as it connects two major cities of Andhra Pradesh. Hence, the company may look to raise Rs 1,800 crore from these four assets," said an industry official.
The money raised will cut the debt pile-up in GMR Highways, the holding company for the road projects. GMR Group's consolidated debt stood at Rs 38,728 crore as on September 2012. "GMR Infra sold three assets leading to a cash surplus of Rs 2,000 crore and gross debt reduction of Rs 4,200 crore. However, this is only half the journey; GMR still has Rs 6,300 crore of mezzanine debt on its balance sheet, which may require further asset sales," Standard Chartered Securities said in its May 6 report.
GMR is also exploring the option of selling some of its road assets in an initial public offering in Singapore to raise as much as $500 million. This plan will materialise only after it completes the sale of four assets and an overseas structure is created to enable a Singapore listing.