GMR's road development arm, GMR Highways has signed a definitive agreement with IDFC's India Infrastructure Fund to sell 74 per cent stake in the special purpose vehicle, GMR Ulundurpet Expressways Pvt Ltd (GUEL) for Rs 222 crore ($35.24 million). The transaction is subject to closing certain conditions, the company said in a statement.
The deal will give the asset an equity valuation of Rs 300 crore besides reducing debt on GMR's books by Rs 459 crore. According to its annual report, GMR had invested little over Rs 82 crore in the project.
GUEL owns and operates a 73-km road project from Tindivanam to Ulundurpet on National Highway 45 in Tamil Nadu.
"We continue to focus on creating liquidity and reducing our leveraged position, as part of our strategy of churning of assets. Divestment of this asset will also reduce the debt as on August 31, 2013, by about Rs 459 crore on a fully consolidated basis, in addition to infusing equity funds of Rs 222 crore. The GMR Group will take this approach in other businesses as well. This partnership will also strengthen the relationship with IDFC," said Madhu Terdal, Group CFO of GMR Group.
"This investment is our first major acquisition and a step towards implementing our strategy of acquiring control of operational projects with a proven traffic history. Given the uncertainty and delays in implementing under-construction projects, we will continue our focus on acquisition of operating road assets," said MK Sinha, managing partner and CEO of IDFC Alternatives.
India Infrastructure Fund, whose mandate is to invest in infrastructure assets in India, is managed by IDFC Alternatives, the alternate asset management arm of IDFC.
The divestment is in line with GMR Group’s 'asset right and asset light strategy'. This also marks a second major divestment in GMR’s roads portfolio in less than six months.
In February this year, Macquarie-SBI Infrastructure Fund (MSIF) bought 74 per cent stake in a toll road project in Andhra Pradesh for Rs 206 crore from GMR.
In March this year, the group decided to sell its stake in two South African coal blocks and 70% in Singapore power plant to FPM Power Holdings for $530 million.
(Edited by Joby Puthuparampil Johnson)