Gammon Infrastructure Projects is planning to raise as much as Rs 200 crore this financial year by selling partial stakes in projects which have either started or in advanced stages of becoming operational.
“We are seeing investor interest in port projects, especially after the initial public offer of Pipavav Shipyard,” said Parag Parikh, chief financial officer.
Infrastructure companies and financial institutions have shown interest in the company’s Vizag sea port bulk terminal project and negotiations on valuation are under way. The project owns and operates two berths for bulk cargo at Visakhapatnam port. It started operations in July 2004 and can handle nine million tonnes per annum cargo.
Apart from this, Gammon has put two road projects on the block. A number of financial investors are showing interest in these, the Mumbai-Nashik expressway and the Rajahmundry expressway. The former is under construction and has a concession period of 20 years, until October 2025. The Rajamundry expressway started in September 2004 and has a revenue stream that comprises semi-annual annuity. The concession period for this project is 17 years and six months, until November 2019.
“The extent of stakes sold will depend on the valuation but we would like to retain majority stakes,” said Parikh.
This cash generation will help the company fund projects under development. It has an annual equity requirement of Rs 300 crore. It is looking to fund it through a mix of debt and equity, which will include Rs 130 crore cash and Rs 100 crore debt.
The equity raised through stake sale in projects will add to the company’s coffers. “The time has come for the company to do value unlocking in some key assets and provide growth capital,” said a report by Ambit Capital.
While trying to sell stakes in projects that are at later stages of development, it also has a strategy to acquire majority stake in projects from its consortium partners in earlier stages. “We like to own assets at the time of bidding. Once they get commissioned, with reasonable visibility in cash generation, we like to dilute equity and build more assets,” said Parikh.
The company recently purchased 20 per cent stake from its Spanish partner, Dragados, in its Mumbai Offshore container terminal under construction. The deal, awaiting clearance from RBI, will give Gammon 70 per cent in the project. Gammon also plans to acquire the rest of Dragados’ stake after its lock-in period ends.
