GMR Infra: A good closure

The company can gain from monetising its assets in InterGen.

GMR Infrastructure has managed to achieve closure for the acquisition of InterGen, one of the leading global power generation company. The closure for refinancing $737 million through a two-year loan at Libor plus 2.75 per cent, with a facility of a five-year Libor plus 4.24 per cent, is seen as a positive. It was in October 2008 that GMR had taken on a debt of $1.1 billion to fund the purchase of a 50 per cent stake in InterGen, which uses gas for 85 per cent of its power generation capacities.

While this is seen as a positive closure for the deal, concerns for GMR Infrastructure persist. According to analysts at Anand Rathi Securities, “Cash flows from InterGen should be able to cover the $55-60 million annual interest payment on the acquisition debt. Principal will be in the form of bullet repayment at the end of tenor. However, given InterGen’s projected cashflow profile, it would need refinancing.” Analysts also indicate that InterGen had $130 million distributable cash, of which it gave 50 per cent to shareholders. “Given aforementioned overhangs, we expect GMR management to focus on monetising InterGen stake,” say analysts at Anand Rathi Securities.

One can expect some consistency from InterGen, as around 70 per cent of its revenues have been contracted till 2017-18, mention analysts. The company also enjoys a steady record of developing 16,000 Mw of power in 10 countries. Also, there are other aspects about GMR Infra that make the company’s share price look to be a good prospect. One is that it has hit the floor at around Rs 55 per share and then there are triggers that could elevate the prospects. Sales to the merchant power trade from its barge-mounted plant from June and higher regulated revenues from the Delhi Airport business are also significant positives. A higher gas allocation from the ministerial group will also be extremely beneficial for the company.