 "Gammon Infra: Cutting debt, looking at driving growth")
Gammon Infrastructure's move to sell its stake in six road and three power projects will fetch it Rs 563 crore. This will also lower its debt of Rs 4,000 crore. But, the Street will keep a track of some issues.
Gammon's move is part of its strategy to cut debt. The company also plans to raise equity for acquiring assets. From a seller, the company wants to be a buyer, according to managing director K K Mohanty.
The company has a debt of Rs 4,000 crore. Of this, Rs 2,000 crore is from operating assets. The deal will see Gammon's debt fall by Rs 1,718 crore, as it gets Rs 563-crore upfront, Rs 100-crore milestone payments linked with projects, waiver of Rs 285 crore of advances taken, and Rs 85 crore of benefits. It also has some interest left in the past contingent receivable dues, which upon settlement can add more. After the deal, operational assets' debt will be Rs 300 crore, and under-construction assets' would be Rs 1,900 crore. As a result, interest costs will also fall.
But, the projects being sold are operational. These bring Rs 500 crore a year to revenues, with Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins of 55 per cent. During the quarter ended June, the company clocked an Ebitda of Rs 119 crore, which for the nine months to June was Rs 395 crore. But, finance costs, Rs 54 crore in the quarter and Rs 169 crore for nine months, along with depreciation, took away a large chunk of operating profits. The net profit was Rs 3.8 crore for the quarter and Rs 18.2 crore for nine months.
The stock, which rose 25 per cent intra-day, has given up some of the gains and is up a net 11 per cent to Rs 11.06 a share in five sessions.
Gammon's move is part of its strategy to cut debt. The company also plans to raise equity for acquiring assets. From a seller, the company wants to be a buyer, according to managing director K K Mohanty.
The company has a debt of Rs 4,000 crore. Of this, Rs 2,000 crore is from operating assets. The deal will see Gammon's debt fall by Rs 1,718 crore, as it gets Rs 563-crore upfront, Rs 100-crore milestone payments linked with projects, waiver of Rs 285 crore of advances taken, and Rs 85 crore of benefits. It also has some interest left in the past contingent receivable dues, which upon settlement can add more. After the deal, operational assets' debt will be Rs 300 crore, and under-construction assets' would be Rs 1,900 crore. As a result, interest costs will also fall.
But, the projects being sold are operational. These bring Rs 500 crore a year to revenues, with Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins of 55 per cent. During the quarter ended June, the company clocked an Ebitda of Rs 119 crore, which for the nine months to June was Rs 395 crore. But, finance costs, Rs 54 crore in the quarter and Rs 169 crore for nine months, along with depreciation, took away a large chunk of operating profits. The net profit was Rs 3.8 crore for the quarter and Rs 18.2 crore for nine months.
The stock, which rose 25 per cent intra-day, has given up some of the gains and is up a net 11 per cent to Rs 11.06 a share in five sessions.