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GVK to offload 20% stake in Singapore arm

28 Nov 2011 Evaluate

GVK Power & Infrastructure’s group company-GVK- in order to raise funds for its Australian projects would offload a 20% stake in its Singapore subsidiary- GVK Coal Developers. However, the group plans to retain the majority in the Singapore firm.

The group plans to deploy the proceeds from the 20% stake sale in GVK Coal Developers for meeting its equity commitments to develop coal mines, a railway line and a seaport in Australia where GVK Coal acquired majority stake from the Hancock group in September for $1.26 billion. However, since Australian acquisition was also aimed at securing long-term coal supplies for GVK's power projects in India.  The company will also utilize a part of its proceeds for funding its rail and port projects to facilitate shipment of coal to India.

Much towards the company’s delight, several financial institutions and private companies have also expressed interest in buying minority stakes in the three special purpose vehicles of coal, railway line and seaport in Australia. GVK is mulling of separating its three projects - coal mining, railway and port - into three verticals with special purpose vehicles so that third parties can pick up minority stakes at the SPV level. However, the stake sale at the SPV level will be after the 20% equity dilution in GVK Coal Developers.

GVK Natural Resources, a GVK group company, holds 90% in the Singapore arm while GVK Power and Infrastructure, the firm listed on the Indian bourses that operates airports, power plants and roads, owns the balance 10%. Further, the equity required for the projects in Australia will be close to $2 billion, although the same may not be raised at one go. The deal is expected to be finalized within a month's time. On a priority basis, the company needs to build a railway line from the Galilee Basin (in Queensland) to Abbot Point coal port in Australia.

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