GMR Infra to sell up to 74% in three toll road projects

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GMR Infrastructure is in talks with some large companies to sell 51 per cent to 74 per cent stake in three operating toll road projects as part of its plan to unlock value and lower its debt. The company is looking to dilute stake at a premium on its investments of around Rs 1,500 crore on the toll roads.

According to a senior company official close to the development, the firm is in talks with a couple of companies with the ability to buy the stake and run the toll roads on a long-term basis. “We are not looking at private equity players, who view businesses from short-term gains perspective. The company is expected to finalise some of the deals over the next couple of months,” said the official.

Since the company has used top contractors for its road projects, it doesn’t expect operations and maintenance to be much of an issue for a company that has expertise in the business.

GMR Highways has three toll roads and three annuity roads under operation spanning around 421 km. Also, there are three annuity-based assets under development, totalling around 309 km.

Overall, the company has spent around Rs 1,800 crore on these projects till now.

Besides there are two toll roads under development in Tamil Nadu and Karnataka aggregating to around 260 km.

The company plans to use the funds raised from the stake dilution to finance the Rs 8,000 crore Kishangarh-Udaipur-Ahmedabad mega highway project and also partially pare debt in the highways business.

Vishwas Udgirkar, senior director at Deloitte India, said: “Typically, companies operating in the toll road business divest stake to unlock value by giving away some equity. At the project level, companies fetch returns ranging from 13 per cent to 20 per cent. But bigger companies like GMR can get higher returns of 25 per cent to 30 per cent,” he said.

GMR bagged the Kishangarh mega highway project by paying a premium to the National Highways Authority of India (NHAI). However, the economic slowdown made it difficult for to company top sell a stake in this project, industry experts said. GMR officials said at this point, they were not looking at selling any stake in this project.

Last month, the company’s management in a discussion with media in Mumbai said they have put on hold their Rs 4,000 crore divestment plan for want of appropriate valuations by financial and strategic investors.

Market analysts believe that the company, carrying a net debt of Rs 33,600 crore, will have to divest part of its assets sooner than later to part-retire the same in order to save itself from huge interest payment obligations.

GMR Infrastructure owns 100 per cent stake in GMR Highways Holding, which implements and operates the group’s road projects.

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