In one of the largest asset sale deals in one go, Gammon India has managed to add Rs 563 crore to its books and cut debt by Rs 1,718 crore.
Gammon Infrastructure has sold stake in nine projects valued at Rs 6,750 crore to Brookfield and Core Infra India Fund, a deal that will fetch Rs 563 crore as well as reduce its debt by Rs 1,718 crore.
The transaction, one of the largest asset sales at one go in the Indian infrastructure space, comes barely days after government allowing highways developers to divest 100% equity in projects two years after the completion, by making additional funds available for investment in projects.
Of the nine projects in which Gammon Infrastructure Projects Ltd (GIPL), a step-down subsidiary of Gammon Infrastructure, sold its stake, six are road projects and remaining three are of power.
"GIPL, a leading Indian infrastructure project developer, signed a share purchase agreement divesting nine of its project companies to the consortium comprising funds managed by Brookfield Asset Management and it affiliates (Brookfield) and Core Infrastructure India Fund Pte Ltd (CIIF) under the name BIF India Holdings Pte Ltd," the company said in a statement.
"Aggregate cash inflows for GIPL on the account of divestment would be approximately Rs 563 crore subject to closing adjustments and an additional cash inflow of up to Rs 100 crore may be realised by GIPL upon crystallisation of certain milestones in future," it said.
Out of the nine project companies, 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 approximately Rs 6,750 crore (Rs 2,935 crore of six operational projects and Rs 3,815 crore for remaining three projects) of which Rs 3,097 crore has been capitalised till March 31, 2015. The outstanding debt as at March 31, 2015 for these projects is Rs 1,718 crore and the net exposure of GIPL in the asset basket is Rs 415 crore," the company said.
It said, "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."
The company said the positive policy changes in the infrastructure space by the government in general and Road Transport and Highways Ministry in particular has resulted in the revival of interest of marquee overseas investors such as Brookfield in the Indian infrastructure sector.
Abhijit Rajan, CMD, Gammon Group said, "The transaction involving nine projects represents the largest asset sale at one go in the Indian infrastructure industry. This is reflective of the improved sentiments being demonstrated by foreign investors due to positive approach of the government in the infrastructure space."
Projects divested by GIPL includes Sikkim Hydro Power Venture Ltd, Andhra Expressway Ltd, Rajahmundry Expressway Ltd, Kosi Bridge Infrastructure Ltd and Gorakhpur Infrastructure Co Ltd.
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