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.
Gammon Infrastructure has sold stake in 9 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, today 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 approx 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 9 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 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 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 added, "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 9 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.
All of these companies are 100% subsidiary of GIPL. Gammon infrastructure has also divested its stake in Mumbai Nashik Expressway Ltd. The company held approximately 80% stake in the firm.
Among key terms of transaction, the company said the consideration towards equity comprises cash consideration of approximately Rs 192 crore and an advance waiver of Rs 285 crore.
These projects SPV being taken over will repay the inter-corporate deposit of approximately Rs 371 crore given by the parent to the SPVs.
GIPL Board has also recommended divestment of 50% shareholding of Vizag Seaport Private Ltd for a consideration of Rs 62.5 crore in favour of Latin Infrastructure Projects Ltd, an affiliate of an existing shareholder, Lastin Group.
Anuj Ranjan, Managing Partner, Brookfield, said, "This transaction represents Brookfield's first major investment in Indian infrastructure and provides us a great platform to participate in the Indian growth story."
Kishor Kumar Mohanty, MD, GIPL, commented, "This transaction allows GIPL to get the much needed capital released from its completed projects and improve its financial position to capture the new opportunities in infrastructure space arising out of governments new initiatives.
"This is a win-win proposition for both Gammon Infrastructure and Brookfield and new path breaking direction for the infrastructure industry."
Brookfield is a leading global alternative asset manager with over $200 billion in assets under management, focusing on infrastructure, renewable energy, private equity and property.
CIIF is an India focused infrastructure fund managed by the Singapore branch of Kotak Mahindra (UK) Ltd.
Earlier this week the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has permitted 100% equity divestment after two years of construction/completion for all BOT projects, irrespective of year of award.
The approval would allow the highways developers to use proceeds from the sale of divested equity in incomplete projects of NHAI or any other road project besides any power sector project or to retire their debt to financial institutions in any other infrastructure projects.
Shares of GIPL closed at Rs 11.32 a scrip, down 0.88% on the BSE from its previous close.
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