Actis, 3i & GIC may swap stake in GVK Energy with listed firm GVK Power & Infra

Private equity investors Actis, 3i and Singapore’s sovereign wealth fund GIC may swap their investment in privately held GVK Energy Ltd with stake in group’s listed arm GVK Power & Infrastructure Ltd. This could be part of a group restructuring exercise necessitated by the erosion in value of investment in GVK Energy, according to a Business Standard report citing sources.

The PE investors together had picked majority stake in GVK Energy for an estimated $326 million in tranches. Notably this was backed by riders for minimum returns with the promoters liable to pay or compensate the investors if the firm failed to provide such returns.

It is not clear if the promoters may look to transfer some of their holding to the investors or merge GMR Energy with GMR Power & Infra or execute a swap of shares in the private group firm with original parent firm, to see through the restructuring.

The promoters’ stake in GVK Power is worth around Rs 900 crore.

GVK had reportedly planned to add 2,800-MW of capacity across fuel sources such as gas and coal, and two hydro power projects at the time of investment by the PE firms. However, it was forced to reduce this due to insufficient supply of gas from KG basin. At present, it generates around 900 MW from its power plants in Punjab and Andhra Pradesh.

GVK Power & Infrastructure, which has interest across infra sector in roads and airports, in addition to power, will give a more diverse exposure to the investors in various assets. It had a net loss of Rs 45 crore with net revenues of Rs 735 crore for the third quarter ended December 31, 2013.

Another infrastructure firm, Bangalore-based GMR Infrastructure, recently went through a similar restructuring exercise wherein Temasek and IDFC Alternatives swapped part of their holding in GMR Energy with a stake in listed parent GMR Infrastructure.

(Edited by Joby Puthuparampil Johnson)

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