MUMBAI: GMR Infrastructure is in pact to sell its 51% stake in a Karnataka road project to its joint venture partner to pare debt, the company said in a statement Friday.
GMR will sell its stake in the 99km-Hungund Hospet Highways project to Oriental Structural Engineers, its JV partner for the project. This will reduce GMR Group’s debt by Rs 1,078 crore and provide Rs 85 crore in cash.
“This transaction once again signifies the GMR Group’s commitment & ability to successfully implement its “Asset-Light-Asset-Right” strategy under challenging market conditions. We, at GMR Group, continue to focus on creating liquidity and reducing our leveraged position, as part of the strategy of churning of assets,” Grandhi Kirankumar, corporate chairman of GMR Group, was quoted as saying.
The project, which was executed under the special purpose vehicle GMR OSE Hungund Hospet Highways Pvt, was bagged by the JV in 2010 under the ‘Build-Operate-Finance’ model.
The stake sale will be executed in two tranches. In the first tranche, OSE has already acquired 14.99% stake. The transaction for the balance stake will be done after National Highways Authority of India (NHAI) and lenders to the project approve the deal.
This is the third major divestment by GMR which has adopted a strategy of raising funds via stake sale to pare debt and wants to have a “asset light” business model. The sale consideration is about 1.1 times of book value of investment, GMR said.
Cash strapped-infrastructure companies like GMR have put assets on block to reduce the leverage on the balancesheet and improve liquidity.
GMR Group, which builds airport, power plants, transportation and urban infrastructure, has been scouting for divestment opportunities across businesses. The group has fifteen power generation projects of which ten are operational and five are under development; nine operating road assets and a double rail track line between Mughalsarai-New Bhaupur (Kanpur) of Eastern Dedicated Freight Corridor under development.