GVK Group, which has announced to acquire assets of Hancock Coal in Australia for $1.26 billion, is likely to invest additional $6 billion in the first phase of development, a senior company official said.
Besides, the Hyderabad-based firm is also looking to raise around $1 billion by selling a part of its stake in its Singapore-based subsidiary, GVK Coal Developers, to fund the acquisition, Chief Financial Officer of GVK Power and Infrastructure, Issac George said.
"We are looking to divest our stake in GVK Coal Developers [Singapore] but it will not go down less than 51% at any time. Once the plan [of diluting the stake] gets finalised, we will zero down on the actual numbers but certainly, it's around $1 billion mark," George said.
He added that total project cost in first phase of development of Hancock's assets would be about $10 billion.
"Of this, our contribution, after divesting stake in GVK Coal, would be around $6 billion. This will be funded through debt-equity ratio of 70:30, so our equity contribution would be about $1.8 billion," he said.
"Besides divesting our stake, we will also outsource a range of activities like coal washing to optimise the cost and bring our investments down to $6 billion in the first phase," George said.
On Friday, GVK had announced that it would buy coal assets and related logistics infrastructure in Australia from Hancock for $1.26 billion through a group company GVK Coal Developers (Singapore). The coal assets have resources to the tune of 7.9 billion tonne.
According to the deal with Hancock, the project is to begin production in 2014 at the rate of 30 million tonne per year. The production can be increased to 84 million tonne as the development of assets progresses.
When asked about possible investors, he said, "A lot of interested strategic investors have approached us, but the discussions with them are yet to begin."
He added that it will take about six months to one year's time to finalise the sale in Singapore arm.
With the acquisition, GVK has joined the club of Adani Group and Lanco Infratech, who have acquired coal assets in Australia.
While Adani Group had bought Linc Energy's Galilee coal project in a cash and royalty deal worth $2.7 billion in August last year, Lanco Infratech had acquired Griffin Coal for AUD 730 million in March this year.
Moreover, some other Indian companies are understood to be in the race of acquiring assets of another Australian firm, Bandanna Energy along with their Chinese counterparts, while an announcement of state-run NMDC buying 50% stake in Legacy Iron Ore, is also expected in the coming days.