GMR Infra to Sell Asset for Debt Repayment

GMR Infra, the Infrastructure conglomerate has initiated discussions with SembCorp Industries Ltd of Singapore and US-based Lone Star Funds for selling a considerable stake in GMR Chhattisgarh Energy Ltd (GCEL), a 100% subsidiary of GMR Energy Ltd (GEL). The move is part of the group’s efforts to trim down its debt that amounts Rs 43,400 crore at the end of September. GCEL has two power plants with a pooled capacity of 1370 MW at Raipur, Chhattisgarh that started commercial operations in March.

On declaration of sale of asset GMR Infra share price was trading on a red note.

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While SembCorp has been in talks with GMR for a while now, the discussion with Lone Star Funds is a fresh development and is tentative in nature.

SembCorp is keen to pick up stake in the project. The absence of long-term power purchase agreements (PPAs) is an obstacle. These make the transaction possible to be given significant cost over-runs in the project.

At present, GCEL has only short-term PPAs and is hoping to sign long-term PPAs with state-owned utilities in Uttar Pradesh and Telangana. It has already proposed for such agreements in the case of the former.

At 11:18 Am, GMR Infra share price was trading at Rs. 12.65 with a decline of 0.39%

As per most recent filings, GCEL has an overall debt of Rs 8,290 crore and is required to start paying back money from March 2017.Its enterprise value (EV) is close to Rs 12,500 crore and includes two captive coal mines valued at Rs 750 crore.

GMR Infra spokesperson said that during the normal course of business, they talk to various parties for different transactions. He also said that they are talking to banks; everyone understands that the current situation helps no one

GCEL will have to sign PPAs in the range of Rs 3.80 per unit to make the project feasible. A slightly lower tariff could be sustainable but only if banks agree on a cessation and a possible restructuring.

The GMR Infra Group, which has interests in airports, energy, transportation and urban infrastructure, is monetizing assets to pay back creditors after years of debt-driven expansion.

In May, it sold a 30% stake in some of GMR Energy Ltd’s assets for $300 million to Tenaga Nasional Bhd, Malaysia’s largest electricity utility. In July, it sold 74% stake in Maru Transmission Services Ltd and 49% in Aravali Transmission Services Ltd to Adani Transmission Ltd for Rs 100 crore.

For the details on GMR infra visit GMR Infra share price history page of Dynamic Levels website.