HCC plans to sell 20-30% in infrastructure subsidiary

Hindustan Construction Company (HCC), the infrastructure developer and engineering, procurement and construction (EPC) company, is looking to divest between 20% and 30% in its infrastructure subsidiary HCC Infrastructure Ltd (HIL).

The move, sources said, is aimed at infusing liquidity into the parent, which requires over Rs1,000 crore to meet capital outflows this fiscal.

The management is currently in discussions with domestic and foreign infrastructure funds for the dilution. A deal is expected in the next three months.

The deal could be worth Rs300-500 crore.

Praveen Sood, group CFO, said, the management wants to grow the business and will be inducting a partner in the infrastructure subsidiary soon.

“The equity so infused will be utilised to fund existing and future developments,” Sood said.

The stake will be diluted to a financial partner looking for a stable, steady income stream.

HIL’s current portfolio is worth Rs5,500 crore with six, built-operate-transfer (BOT) road projects of which one is already operational.

HIL with HCC is understood to have invested around Rs350 crore in these projects, against an overall capital requirement of Rs1,000 crore. It has to arrange for the balance Rs650 crore for use over the next 2-3 years.

Analysts tracking HCC  said the company’s net debt to equity currently stands at 1.5:1, persuading the capital infusion.

HCC’s finance plans this year include capital expenditure (Rs100-150 crore), working capital requirement (Rs200 crore), FCCB conversion and interest payments (Rs600-odd crore) and equity in BOT projects (Rs250 crore).

“With a fairly high debt ratio and not a very conducive public market scenario, the possibilities of diluting stake in existing assets / entities is a likely option to explore,” said Abhinav Bhandari, analyst — construction and infrastructure, Elara Capital.