GMR Infra looks at PE funding for roads arm

GMR Airports Infrastructure Ltd. | Airport Management Services | Construction & Infrastructure | BSE: 532754 | NSE: GMRINFRA

22 Sep 2011 Evaluate

GMR Infrastructure, the Bangalore-based infrastructure developer, is setting the stage to raise private equity in its road business. The company may be looking to raise around Rs. 960 crore over a period to infuse equity in various new projects in this vertical. The roads vertical, dwarfed by the flagship airport and power verticals of GMR Infrastructure, is expected to win the bid for India’s largest highway project extending 555 km in connecting Ahmedabad in Gujarat to Kishangarh in Rajasthan. The project is worth Rs. 7,000 crore. The company is awaiting a decision by the National Highways Authority of India.

However, the company has enough equity on hand to fund the ongoing projects. The objective is to empower each vertical to address funding issues on their own and not always rely on GMR Infrastructure. It is also to prepare the stage of taking each of the verticals public eventually. If GMR Infrastructure wins the Rs. 7,000 crore NHAI project, it will have to infuse Rs. 1,750 crore, as it traditionally works on the 75:25 debt-equity ratio to develop its projects. Last year, it raised Rs. 1,360 crore for its energy business and another Rs 1,490 crore for the airport business through the PE route. While the roads vertical contributes just under 10 per cent to the overall Rs. 5,800 crore revenue, the share is expected to move up in two years as its under-development assets and new projects are expected to contribute immensely. Under the roads vertical, GMR Infrastructure has nine projects covering 730 km, of which, six covering 421 km are operational and spread equally between toll and annuity based projects. Of the other three, which are at the development stage, two are under toll, while the third one is an annuity contract