Infrastructure major NCC Ltd (formerly known as Nagarjuna Construction Co Ltd) is gearing up to dilute 15-20% stake in its wholly owned subsidiary NCC Infrastructure Holdings Ltd.

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NCC Infrastructure owns five road and three power assets.

“We are looking at PE firms for dilution,” YD Murthy, the company’s executive vice-president (finance), said without divulging the quantum of dilution.

“The equity dilution should happen in the next six to nine months,” Murthy said.The money will go to fund its 1,320 mw power project being set up at Krishnapatnam in Andhra Pradesh.

NCC has so far invested about Rs650 crore in the form of equity in road and power projects.

For Krishnapatnam, its commitment towards equity is about Rs950 crore of which about Rs150 crore has already been invested.

“We will immediately invest another Rs100 crore towards equity of the project and achieve the financial closure. It would leave us with a need to invest another Rs700 crore, which would be met through the funds raised from the equity dilution,” Murthy said. However, he said, the quantum of dilution is a valuation issue and would be decided shortly.

NCC Infrastructure owns 55% in Rs1,800 crore equity of the Krishnapatnam power project while the balance is held by another Hyderabad-based infrastructure company Gayatri Projects.  

The project, which involves an investment of over Rs7,085 crore, will be funded through a debt of `5,285 crore and equity of Rs1,800 crore.

The company was earlier consider setting up of a power project at Sompeta in AP. However, with the locals protesting the setting up of the project owing to environment concerns, the company made changes to its plans and moved to Krishnapatnam. NCC acquired the project and land from the Chennai-based Nelcast for Rs150 crore.

According to Murthy, the project has already received debt sanctions for about Rs3,200 crore from a consortium of Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) and is in talks with State Bank of India and ICICI Bank to secure Rs1,000 crore from each.

“We expect revenues to grow 15-20% a year and maintain the net profit margin at around 3.8% over the next 2-3 years,” Murthy said.

The company has already indicated that it would miss its revenue target for the year ending March 2011 and instead of reaching Rs7,000-crore mark, it would end up at about Rs6,600 crore.