GMR Infra's rights issue to cut debt, improve cash flow

Equity shares being offered on a rights basis to eligible equity shareholders in ratio of 3 equity shares for every 14 equity shares

GMR Infrastructure has come out with a rights issue to mobilise Rs 1,400 crore consisting of 934.5 million fully paid-up equity shares of with a face value of Re 1 each. The equity shares are being offered on a rights basis in the ratio of three equity shares for every 14 shares held on the record date of March 12.

Opened on March 24, the rights issue is set to close on April 8, 2015. The issue is set to bring the company back on track by reducing debt at the corporate level and thereby improving the company’s balance sheet.

GMR Infrastructure’s consolidated debt as on March 31, 2014 was Rs 45,000 crore. It will come down as 90 per cent of the rights issue proceeds will be used to repay debt.

The promoters have already secured funds to subscribe to their share of the rights issue. With the capex phase behind and the last large power project (1.4 Gw Chhattisgarh power plant) to be operational shortly, GMR’s cash flow is set to improve.

The management has cited servicing of corporate debt as the key objective of the rights issue. Over the past few years, GMR has been focusing on strengthening its balance sheet. It began with hiving off assets and it is now infusing equity. According to analysts, such de-leveraging will bolster operational improvement through commissioning of under-construction projects.

In the past 18 months, through strategic divestment, the company has released equity worth Rs 3,834 crore and reduced its liabilities by Rs 6,180 crore. The company’s capex is now close to end and its assets have now moved from construction to operational phase.

The lead bankers for the rights issue are JM Financial, Axis Capital Holdings, ICICI Securities and SBI Capital Markets.

GMR shares closed on Wednesday at Rs 16.8 apiece, a gain of 1.2 per cent over the previous close.
NUMBER CRUNCHING

• Rs 1,400 cr To be mobilised by GMR Infrastructure's rights issue
• The issue will comprise 934.5 mn fully paid-up shares. Each will have Re 1 face value
• The shares are being offered on a rights basis to eligible equity shareholders in the ratio of 3 shares for every 14 shares held on 12 March