GMR Energy to float Rs 1,000-cr public offer

Company likely to file a draft red herring prospectus by month end

 Bangalore-based GMR Infra is planning to raise equity by going in for an initial public offer of its power business, GMR Energy. It is in talks with investment bankers and is likely to file a draft red herring prospectus (DRHP) by the end of the month.

“The issue size can be anything in between Rs 1,000-1,500 crore. It looks difficult but the company is trying to raise money,” said an official close to the development. The investment banks that are taking part in the deal are Merrill Lynch and Australian bank Macquarie.

To an e-mailed query on the development, GMR spokesperson said, “As a policy we do not comment on speculation.”

The timing of the issue could work against the company as the power sector is facing troubles like blocked payments from state electricity boards amongst others. The company said that they have been following with SEBs for their dues. “Past dues in Tamil Nadu Electricity Board (TNEB) reduced substantially with receipt of around Rs 650 crore during the current year,” the company said in its results press release, today.

GMR itself has two gas-based power projects with a capacity of 1,156 megawatt that has been affected due to lack of natural gas supply from the Krishna-Godavari basin.

“While the gas-based plants are still affected by lack of gas supply, the coal uncertainty has to some extent got mitigated through the Cabinet Committee on Economic Affairs (CCEA) directive and coal-based plants are being stabilised. We have signed the fuel supply agreement for EMCO’s Warora Plant, and operation with linkage coal has commenced. The other coal based plant at Kamalanga also got commissioned in the first quarter,” said G M Rao, the chairman of the company, commenting on its quarterly performance.

The power business of the company posted extended losses of Rs 368 crore for the first quarter ended June 2013. These losses expanded 13.6 times from Rs 27 crore loss in the corresponding quarter, last year. It's earnings before interest, tax, depreciation and amortisation (EBIDTA) also slipped into the negative at Rs 76 crore loss, as compared to Rs 107 in profits a year back.

If the company becomes successful in raising money via equity, this would be the third deal it would executing this year. It has already raised Rs 1,376 crore by selling its Singapore power plant to FPM Power Holdings in March this year. It also sold stake in its Jadcherla Expressways road project to SBI Macquarie for Rs 206 crore in February, this year.

GMR's energy business has an operating capacity of 1,836 megawatts. It also has a portfolio of more than 3,000 megawatts under development, that includes five hydro power projects and four coal projects. It also includes a small wind project and a solar power project as well.

 It also has two private equity investors in the company—Singapore-based Temasek which invested $200 million and IDFC Private Equity, which invested $100 million in two rounds of investments in 2010. These private equity deals are structured, that come with a caveat of compulsorily convertible into equity. The timeline of this equity conversion is believed to be ending in early 2014.

GMR's power portfolio

Installed capacity: 1,836 Mw

Under development: around 3,000 Mw

GMR's power investors

* Temasek invested $200 mn in April, 2010

* IDFC PE invested $100 mn in June, 2010