Gammon Infra to sell holdings in 9 project firms

Sale to Canada's Brookfield Asset Management to get company Rs 563 cr cash inflows

Gammon Infrastructure Projects Limited (GIPL) has entered into an agreement with Canadian asset management company Brookfield to sell its holdings in nine project companies. Six of the special purpose vehicles (SPVs) are in the road sector and three in the power sector.

A consortium comprising funds managed by Brookfield Asset Management and its affiliates will take over these projects by paying Rs 192 crore in cash and waiving Rs 285 crore in advances to GIPL, which has consolidated debt of nearly Rs 4,000 crore.

The decision was taken at a GIPL board meeting on Thursday night.

The SPVs in the deal are Andhra Expressway, Rajahmundry Expressway, Kosi Bridge Infrastructure Co, Gorakhpur Infrastructure Co, Mumbai Nasik Expressway, Vijayawada Gundu Golanu Road Project, Pravara Renewable Energy, Sikkim Hydropower Ventures and Aparna Infra Energy India.

Six of the projects to be acquired by the consortium are operational, one is being expanded and two are under development.

The total cost on completion of the asset basket is an estimated Rs 6,750 crore — Rs 2,935 crore for six operational projects and Rs 3,815 crore for the remaining three — of which Rs 3,097 crore had been capitalised till March 31, 2015.

GIPL’s debt on March 31, 2015, for these projects was Rs 1,718 crore and its net exposure to the asset basket was Rs 415 crore.  A company release said after the transaction, the consolidated debt of GIPL will reduce to Rs 2,229 crore from Rs 3,947 crore.

This apart, outstanding liabilities of Rs 87 crore will stand reduced and GIPL will receive 75 per cent of past contingent receivables when realised.

The GIPL stock closed at Rs 11.32 on the BSE on Friday, down 0.9 per cent.

The cash inflow for GIPL from the divestment will be approximately Rs 563 crore, subject to closing adjustments.

Additional inflows of up to Rs 100 crore may be realised by GIPL on attaining certain milestones in future. According to the company, the other components of the deal include a cash consideration of Rs 192 crore, waiver of Rs 285 crore advances and repayment of Rs 371 crore inter-corporate deposits given by GIPL to the SPVs. Ambit Corporate Finance acted as the financial adviser to GIPL on this transaction.

Gammon Group Chairman Abhijit Rajan said, “The transaction involving nine projects represents the largest asset sale at one go in the Indian infrastructure industry. This is reflective of the improved sentiment due to the positive approach of the government in the infrastructure space.”

Brookfield Managing Partner Anuj Ranjan said the transaction represented Brookfield’s first major investment in Indian infrastructure and provided it a platform to participate in the Indian growth story. The GIPL board has also recommended selling 50 per cent shareholding in Vizag Seaport for Rs 62.5 crore to Lastin Infrastructure Projects Limited, an affiliate of an existing shareholder, the Lastin Group. According to GIPL, it will continue to be committed towards its other project companies with interests across various sectors such as road, expressways, ports and power and its future growth.