Reliance Infrastructure drops plans to sell stakes in airports

Company says debt will be negligible by March 2018

Reliance Infrastructure has dropped plans to sell five airports in its portfolio although it plans to sell other assets to become almost debt free by March 2018. 

The Anil Ambani-promoted company had invested Rs 100 crore in five airport projects in Maharashtra through its subsidiary Reliance Airport Developers. It was earlier planning to sell these airports. 

“It is too small an investment. We have no plans (for a sale) as of now,” said Lalit Jalan, chief executive officer, Reliance Infrastructure, which operates regional airports at Nanded, Yavatmal, Baramati, Latur and Osmanabad. 

The company acquired the rights to develop and operate these airports for 95 years from the Maharashtra government.

Reliance Infrastructure had standalone debt of around Rs 15,000 crore and consolidated debt of around Rs 25,000 crore in September, Jalan said. “We should be a near debt-free company by March 2018,” he added.

Although plans to sell the airports have been dropped, the company continues to monetise other assets in an effort to reduce debt. 

“We are launching an infrastructure investment trust to monetise our investment in roads. We have secured approval from the Securities and Exchange Board of India for the issue and have filed a draft red herring prospectus. We hope to launch the issue in this quarter,” Jalan said. 

The company is planning to continue operating the 10 road projects it intends to refinance through the infrastructure investment trust by partial equity dilution.

Reliance Infrastructure is finalising the sale of its power transmission business to Adani Transmission.  “We have closed the documentation, implementation is happening and we are awaiting approvals from Power Grid Corporation for the sale,” Jalan said.

Reliance Infrastructure had in December announced the signing of a share purchase agreement with Adani Transmission for the sale of its western region system strengthening scheme transmission assets for Rs 1,000 crore. It also planning to sell Parbati Koldam Transmission Company to Adani Transmission subject to approval by Power Grid Corporation.

Reliance Infrastructure expects its deal with PSP Investments for a 49 per cent stake sale in the Mumbai electricity distribution business to take longer. “The details will be revised based on the Maharashtra Electricity Regulatory Commission tariff order and we should be able to close the deal before March 2018,” Jalan said. 

Reliance Infrastructure had entered into an agreement with PSP Investments of Canada in November 2015 for the sale of a 49 per cent stake in its Mumbai power generation, transmission and distribution business. Jalan added the debt related to these assets was Rs 7,000 crore.

Reliance Infrastructure sold its cement business for Rs 4,800 crore in February and used the proceeds to pare debt. The company plans shave another Rs 6,000 crore debt through the infrastructure investment trust. A further Rs 2,000 crore from the sale of the transmission business to Adani will be used to retire debt. The company has not disclosed the deal value for the distribution business sale, which will also be used for debt reduction.

“The focus for the company is road construction, the Mumbai electricity distribution business and defence,” Jalan said. Reliance Infrastructure is not keen to bid for build-operate-transfer (BoT) and hybrid annuity model road projects.  “We do not want to put more equity and we still see risks in BOT. Our first priority is to reduce our leverage,” Jalan added.

The company plans to bid for Rs 2 lakh crore of engineering, procurement and construction (EPC) orders. Till September, Reliance Infrastructure’s EPC order book was Rs 2,191 crore and it earned a revenue of Rs 524 crore in July-September. The roads business earned a revenue of Rs 237 crore during the quarter. 

Of its Rs 21,342 crore total revenue during the quarter, almost 90 per cent came from power distribution and the remaining Rs 2,389 crore from the EPC and contract businesses.