 "GVK: Higher chances of asset monetisation")
GVK Power & Infrastructure, which is among companies grappling with high debt, is again in the news for its plans to sell stake in some of its assets as well as raise funds through qualified institutional placement to cut debt. But, unlike earlier, the market now seems more confident and believes that the company could actually close some of these deals soon, given the improving economic outlook and higher risk appetite of big investors.
GVK said it was exploring options for reducing debt. The group’s chief financial officer, A Issac George, also confirmed plans to raise Rs 1,500 crore through QIP.
GVK is currently operating in three major segments — power, roads and airports. A large part of these businesses are funded by debt of Rs 21,837 crore in FY14. Due to the high debt, in FY14, GVK incurred interest cost of Rs 905 crore, leading to its losses reaching Rs 369 crore.
In the airport division, the company has deployed over Rs 10,000 crore. This could now materialise. GVK's confidence comes from the airport division’s 85 per cent jump in earnings before interest and taxes to Rs 463 crore in FY14; roads too saw good rise of 28 per cent in profits to Rs 176 crore.
Additionally, GVK is looking to bring in an equity investor into Hancock Infrastructure, a holding company for its rail and port projects in Australia. If all these materialise, it will have a positive impact on the balance sheet and profitability. But, even a funding of Rs 2,000-Rs 2,500 crore could mean savings of about Rs 240-300 crore in interest cost, which should at least help GVK break-even at the net level.
Today, the power segment, despite being the largest contributor (Rs 11,457 crore) to the capital employed, is still not contributing to both revenues and profits. If fuel availability issues are resolved, the same along with successful fund raising could mean better days ahead for GVK.
GVK said it was exploring options for reducing debt. The group’s chief financial officer, A Issac George, also confirmed plans to raise Rs 1,500 crore through QIP.
GVK is currently operating in three major segments — power, roads and airports. A large part of these businesses are funded by debt of Rs 21,837 crore in FY14. Due to the high debt, in FY14, GVK incurred interest cost of Rs 905 crore, leading to its losses reaching Rs 369 crore.
In the airport division, the company has deployed over Rs 10,000 crore. This could now materialise. GVK's confidence comes from the airport division’s 85 per cent jump in earnings before interest and taxes to Rs 463 crore in FY14; roads too saw good rise of 28 per cent in profits to Rs 176 crore.
Additionally, GVK is looking to bring in an equity investor into Hancock Infrastructure, a holding company for its rail and port projects in Australia. If all these materialise, it will have a positive impact on the balance sheet and profitability. But, even a funding of Rs 2,000-Rs 2,500 crore could mean savings of about Rs 240-300 crore in interest cost, which should at least help GVK break-even at the net level.
Today, the power segment, despite being the largest contributor (Rs 11,457 crore) to the capital employed, is still not contributing to both revenues and profits. If fuel availability issues are resolved, the same along with successful fund raising could mean better days ahead for GVK.