Gammon Infrastructure Projects signs share purchase agreement to divest nine project companies

Total project cost of asset basket is approximately Rs 6750 crore

Gammon Infrastructure Projects (GIPL) has signed a Share Purchase Agreement divesting nine of its project companies (6 road and 3 power) to the consortium comprising funds managed by Brookfield Asset Management and its affiliates (Brookfield) and Core Infrastructure India Fund (CIIF) (collectively the Consortium) under the name BIF India Holdings. Out of the project companies to be acquired by the Consortium, six are operational, one is under expansion and two are under development.

The total project cost at completion of the asset basket is estimated to be approx. Rs. 6,750 crore (Rs. 2,935 crore of 6 operational projects and Rs. 3,815 crore for remaining 3 projects) of which Rs. 3,097 crore has been capitalized till 31 March 2015. The outstanding debt as at 31 March 2015 for these projects is Rs. 1,718 crore and the net exposure of GIPL in the asset basket is Rs. 415 crore.

Post the transaction, the consolidated debt of GIPL will stand reduced from Rs. 3,947 crore to Rs. 2,229 crore which is expected to improve the gearing of Company at consolidated level from more than 4x to around 2x going forward and make GIPL net cash surplus.

Key terms of the transaction:

The consideration towards equity comprises of cash consideration of approx. Rs. 192 crore and a waiver of advances to GIPL of Rs. 285 crore;

The project SPVs being taken over will repay the inter corporate deposits of approx. Rs. 371 crore given by GIPL to the Project SPVs;

Aggregate cash inflows for GIPL on account of divestment would be approx. Rs. 563 crore subject to closing adjustments;

Additional cash inflow of upto Rs. 100 crore may be realized by GIPL upon crystallization of certain milestones in future.

GIPL will also benefit further from - The outstanding liabilities to the tune of Rs. 87 crore will stand reduced and 75% of past contingent receivable may also be received by the Company when realized.

The transaction is subject to necessary statutory and regulatory approvals, consents from the lenders and shareholders, satisfaction of certain contractual conditions and has been recommended unanimously by the Board of Directors of GIPL.

The Board of Gammon Infrastructure has also recommended divestment of 50% shareholding of Vizag Seaport for a consideration of Rs 62.5 crore in favor of Lastin Infrastructure Projects, an affiliate of an existing shareholder, Lastin Group.

The transaction is subject to necessary statutory and regulatory approvals, consent from the lenders & shareholders and has been recommended unanimously by the Board of Directors of GIPL.

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