Debt-ridden GMR plans to raise Rs 5,400 cr

Amount likely to be raised through asset sale, equity issue; company might divest a few road and power plants

Bangalore-based GMR Infrastructure plans to raise up to Rs 5,400 crore through sale of assets and issue of fresh equity in the next three months to a year, in a bid to bring down its debt burden and to finance projects.

At the end of the last financial year, the company's debt stood at Rs 45,000 crore - six times its equity. The funds raised will be utilised to check this debt, and also to infuse Rs 900 crore equity in the upcoming 1,370 Mw thermal power plant in Chhattisgarh.

The company, promoted by billionaire G M Rao, reported a loss of Rs 1,618 crore after adjusting for extraordinary items in 2013-14. About Rs 2,971 crore was required for interest payment.

"The over-leveraging happened because the promised coal and gas was not available for our power plants and these projects could not be completed in time," says Madhu Terdal, chief financial officer for the GMR Group. The company has about 1,400 Mw of power capacity lying idle due to lack of gas.

GMR has adopted a two-fold strategy to sell some of its assets as well as raise fresh equity so that its debt is met effectively and it returns to profitability by getting the under-construction projects operational.

It sold seven assets in the past 12 months, including a 70 per cent stake in a Singapore power development venture for about Rs 2,800 crore and a 40 per cent stake in the Istanbul airport for Rs 1,900 crore. It also raised Rs 1,500 crore through qualified institutional placement in July.

Out of the Rs 45,000 crore debt, about Rs 6,000 crore is corporate debt that is not backed by any cash flow. It is this debt that the company wants to reduce first. It plans to prune it by Rs 1,500 crore by the end of the current financial year. In the next financial year, it plans to reduce it further by 20 to 25 per cent. Project debt will find a solution on its own as the fuel supply issues are addressed.

The company is looking at divesting a few road and power plants to raise Rs 1,000 crore to Rs 3,000 crore in the next three months to a year period.

"Divestment has become a part of overall group strategy like a portfolio management," says Terdal. "We have realised that infrastructure is a very large, capital-consuming business. So, we have to keep certain core assets and keep churning certain periphery assets."

He did not specify those periphery assets which would be going on the block.

On the equity front, it plans to raise Rs 1,200 to Rs 2,400 crore in this period. This could happen through a combination of rights, warrants, convertibles or intial public offering(IPO).

The company is considering the plan to club all its power assets and then do an IPO. But for that, first the coal and gas issues need to be resolved.