A clutch of private equity investors led by global powerhouse Singapore-based Temasek and IDFC are set to land equity in GMR Infrastructure and as well as in its step down subsidiary GMR Energy in lieu of the $300 million they had invested during late 2010.
This move is part of protracted negotiations which has been going on for the past few months and which will avoid GMR Infrastructure buying back the compulsory convertible preference shares (CCPS) given to PE investors. Temasek had invested the major share with $200 million. GMR Infrastructure offered not to comment on this move to offer equity in GMR Infrastructure and GMR Energy, terming it as speculation.
This move by PE investors to convert their CCPS in to equity at GMR Infrastructure and GMR Energy comes after the investors decided not to exercise their rights of enforcing the Put Option, which was to be effected by August 2013.
A put option gives the holder the right to sell securities at a specified price within a limited period. When an option is exercised by the holder, the shareholder will be obligated to buy or sell the shares at the predetermined price.
This move comes as a relief for the under-stress GMR Infrastructure, which has been looking at various options to reduce its gearing and is trying to shed some assets. GMR Infrastrucure is grappling with a gearing at 3.7 times under a debt of close to Rs 41,000 crore.
If the PE investors had exercised the put option, GMR would have had to buy back from them, further straining their balance sheet, at a time when the company is looking to infuse as much as Rs 1,700 crore through the equity route to fuel its power projects during FY14.
The power vertical, which contributes around 25% of total group revenues of close to Rs 10,000 crore, has been facing intense problems over the past many quarters at a couple of its operational plants as gas was not available to fuel them.
As part of its roll-out plans, GMR has been aggressive on kickstarting its thermal power projects with a cumulative capacity of 3,000 Mw across three projects. The fresh equity of Rs 1,700 crore will be infused into three projects — GMR Kamalanga Energy, Emco and Chhattisgarh--and transmission projects. The company will infuse Rs 440 crore into Kamalanga, Rs 130 crore into Emco and Rs 830 crore into Chhattisgarh projects, while Rs 15-20 crore will be spent on transmission projects this year.
The move by PE investors not to push for the put option is also in sync with GMR’s move to look at a Rs 1,500 crore public offer plan, which is now picking up pace.
The step by GMR to offer some stake in GMR Infrastruture and GMR Energy is understood to also stem from a throught process that they will be able to aim at more primary infusion rather than allowing the PE investors to cash out during the public issue.
GMR Infrastructure posted a net profit by the end of FY13, after a series of bad quarters over the past two years, primarily by exiting its 70% stake in a power project in Singapore, which released resources of around Rs 1,500 crore.
