GMR Infrastructure, the city-based publicly held infrastructure developer, is understood to be rethinking its move to raise $300 million through the private equity (PE) route to fund the expansion of its highways business.
The company, which also has interests in developing airports and power projects, has been in discussions with a clutch of global PE players, including Standard Chartered Private Equity and 3i Group, for the past few months. “While Standard Chartered is in the lead at the juncture, the 20 per cent ROI (return on investment) expected by the investors has made the GMR management rethink the fund raise. We feel we can manage to defer the PE fund raise by another year,” a senior official of GMR Infrastructure told Business Standard. A company spokesperson offered not to comment on what he termed “speculation”.
GMR Infrastructure has been looking to raise private equity to fuel its highways business, which towards the end of last year bagged a contract worth Rs 7,700 crore to upgrade a national highway connecting Gujarat and Rajasthan. It won the contract through an international competitive bidding, for six-laning of the 555-km Kishangarh–Udaipur–Ahmedabad highway. It’ll implement the project through public-private partnership on the design, build, finance, operate and transfer model. The highway section is a part of the Delhi-Mumbai (Golden Quadrilateral) corridor and goes through the newly announced Delhi-Mumbai Industrial Corridor, which has high growth potential for commercial and tourist traffic.
GMR has to infuse Rs 2,300 crore as equity for this project over three years, while the rest, Rs 5,400 crore, has been more or less tied up from a consortium led by IDBI. “We can easily manage to infuse Rs 800 crore equity from GMR Infrastructure and we are looking at Rs 1,500 crore from the PE players. We have already infused Rs 200 crore equity and we need another Rs 490 crore as equity during the first year and the rest over the next two years. We are contemplating whether we have to shell out 20 per cent returns or manage to infuse that sum from internal resources and defer the external equity fund raise to next year,” the senior official said.
He said arranging Rs 490 crore during the first year “will not be a stretch for GMR Infrastructure and we need not hurry with external PE funding to meet the financial closure deadline by May 2012.”
He, however, said eventually the group would have to raise external equity at the highway business segment and make the division independent akin to the practice followed by it for its airports and power verticals. “The road map for the three verticals is to go public based on their own strengths. As part of this, we have to ensure that they are able to raise equity on their own and need not always rely on GMR Infrastructure to infuse equity,” the official said. Over the past 18 months, the airports and power divisions have raised Rs 1,500 crore and Rs 1,400 crore, respectively, from a clutch of PE funds. Marquee global investors, including Temasek, SBI Macquarie, IDFC, Argonaut, JM Financial and Ascent Capital, were part of the earlier fund raise.
Even as the company is contemplating external equity fund infusion, the debt element has been firmed up, with IDBI underwriting 50 per cent of the Rs 5,400-crore requirement, while the rest will be syndicated by IDBI.
