 "GMR looking for investors in energy biz")
The group is also looking at a 2017 horizon to come out of the current high debt-to-Ebitda (earnings before interest, taxes, depreciation and amortisation) level, Madhu Terdal, group chief financial officer, told Business Standard. "We will get strategic investment at the energy company holding level or project level."
Last Tuesday, Kuwait Investment Authority, Rs 400,000-crore sovereign wealth fund of the Kuwaiti government, agreed to invest Rs 2,000 crore ($300 million) in GMR Infrastructure. This would be the largest bilateral investment between India and the West Asian country in recent times.
Also Read
| TURNAROUND PLAN |
|
Asked whether KIA could take a stake in GMR Energy, Terdal said, "It is too early to talk about it. Obviously, if they have trust in the group's strategy… But, we have not got into any discussion with them on this." Analysts view KIA investment as dilution of equity in GMR but Terdal said KIA was a long-term investor in the fundings it has so far made globally. The fact that they signed for 60-year tenure bonds showed they would remain invested.
The group has been following an asset-light strategy and has kept off capital expenditure (except for select opportunities in the airport sector) for the past few years. In the past two years, it divested five assets, releasing Rs 3,800-crore equity and reducing liabilities by Rs 6,200 crore.
The group has total debt of close to Rs 47,500 crore at the consolidated level, of which 85 per cent is project debt and 15 per cent is corporate debt.
Terdal said Ebitda was Rs 2,600 crore in March 2014 but this fell by by March 2015 to Rs 2,550 crore and to Rs 1,759 crore in September 2015. This was since the group was operationalising its projects. They expect Ebitda, however, to rise 54 per cent by March 2016 to Rs 4,000 crore.
"Till March 2015, we were in the construction phase. We have entered the turnaround phase and the numbers are changing to positive. By March 2016, we expect the net debt to Ebitda proportions to change to 10 times and further improve to six or seven times by March 2017," Terdal claimed.
The confidence comes from the fact that though debt has gone up, it has managed to improve its quality and created productive assets worth Rs 65,000 crore. "2015 was the peak year for our debt but operating parameters are improving, with over 90 per cent of loans deployed in productive assets."
Terdal said they had not gone for corporate debt restructuring like other groups but still the interest coverage ratio would improve to 1.3 times by 2017, compared to 1.1 times in 2016, 0.7 in 2015 and 0.9 in 2014.
The interest coverage ratio is when company's earnings before interest and taxes (Ebit) over the amount it pays in interest on its debts during a particular period.
On analyst skepticism about foreign funding from KIA, he said it was 7.5 per cent dollar money over 60-year time period, so there was no hedging cost with it. "We do not need to pay principle for 60 years. We have derisked it. It can be converted into equity whenever the stock reaches Rs 23.40 a share. We will be replacing 13-14 per cent debt with foreign money. It will save more than Rs 120 crore annually."
The focus of the group has moved from asset growth to cash generation. It is looking to consolidate its existing operational projects and improve cash flows from them. It has three operational airports with two in India and one in the Philippines.
DIAL, the SPV for Delhi airport, recently raised $289 million in bonds through an international issue to replace the existing external commercial borrowings. This would save Rs 270 crore annually by way of liquidity. In power, it has 15 generation assets of which eight are operational and seven are under various stages of development.