GMR Infrastructure not to rush into Rs 1,500-cr rights issue

Private placement or exiting select power plants may take centrestage

GMR Infrastructure, within weeks of announcing that it will raise as much as  Rs 1,500 crore through a rights issue by November 2014, has now said that it will not rush into it. The sharp drop in stock price of GMR Infrastructure by as much as 35 per cent during the last one month to Rs 17.80 has forced GMR to take that move.

In a regulatory disclosure, GMR Infrastructure said that the rights issue is only one of the options that GMR is pursuing to strengthen its balance sheet. “While the group will be in a state of preparedness, the board will choose its time and appropriate price level in the best interests of all investors. In any case, the rights issue is not contemplated at the current market price,” the company said as part of that disclosure.

This announcement by GMR Infrastructure is expected to hit the company hard as it will have to work out other ways quickly to address the leverage issue which has been dogging the company for quite a while. With a debt of as much as Rs 38,000 crore, the gearing presently is around 3.5 times and GMR had hoped that with the rights issue, along with the recently concluded QIP fund raise of Rs 1,500 crore, the leverage will be down to around 2.8 times.

According to information available, GMR Infrastructure is actively looking at various options to reduce its corporate debt which is around Rs 4,500 crore. The company is right now actively seeking to bring that sum down by around Rs 2,000 crore which has been taken on account of its equity infusion into its power vertical.

“The company is discussing various options — public float of the power vertical, private placement besides selling assets. However, with public float of the power business still a while away, GMR is actively in talks with a couple of Pension Funds to raise resources. GMR has parallely been talking with a few strategic players to either rope in investors into its thermal power plants or as well look at exiting few assets," a senior industry analyst told Business Standard.

GMR has committed as much as around Rs 30,000 crore towards the power vertical. But, due to various issues over gas linkages to fuel the power plants, the revenues has been lagging drastically. However, GMR has over the past year been able to commission to a large extent two thermal power plants, the revenues of which has started to reflect to an extent.

However, with more issues plaguing its third power plant in achieving financial closure as well as deferring the date of commissioning, GMR will have to address the situation appropriately.

GMR's power business currently has 2,501 Mw of gross operational capacity while another 2,319 Mw of capacity is under construction besides looking to add 3,695 MW which is under the development stage.  GMR's power vertical presently contributes around 33 per cent to the gross group revenues of around Rs 10,000 crore.

GMR had in fact earlier this year filed its prospectus for a public offer but hurriedly pulled it back citing fast changing scenarios in the power sector and as well as strategic interest in its coal fired power projects.