InterGen buy to power GMR ahead

In the largest-ever overseas deal in the Indian power space, GMR picked up 50% stake in US-based InterGen for USD 1.1 billion.

Madhu Terdal, Executive Vice President of International Business Development at GMR Infrastructure said this landmark transaction is going to change the entire profile of the GMR Group and the entire power industry. He added that the CRR and repo rate hike would not affect the company’s financing too much. He does not see any of GMR’s projects being deferred in light of the rate hikes, as most of its projects are long-term projects.

Excerpts from CNBC-TV18's exclusive interview with Madhu Terdal:

Q: How does it change the dynamics of the company right now?

A: This is a sort of landmark transaction, which is going to change the entire profile of the GMR Group and the entire power industry. We had been looking at this kind of transaction.

We have got two growth engines: one is driven by the airport sector where we have got the Delhi Airport, the Hyderabad Airport as well as the Istanbul Sabiha Gokcen International Airport (SGA) with almost 40 million passengers.

We are the fourth largest airport operator at the global level. Now, for the last one-year or so, we were looking for a power engine which is going to drive the entire growth of the GMR Group during the coming years and decades.

We have been very active in the Indian segment as well. But we felt that a very powerful dynamo at the global level would help us to further our cause. It is in this context that we had set-up an international business and we will also set-up a company in London.

Q: How will it change the financials for the listed GMR Infrastructure in the next two-years because of this acquisition? What is the financing climate with the Reserve Bank of India now hiking rates? What is the constraint that GMR Infrastructure may feel at home with respect to its capex plans?

A: In terms of financing, the CRR and repo hike is not going to have any impact on us because the entire financing has come from the overseas branches of Indian banks.

These branches are situated in Colombo, Dubai, Singapore and Hong Kong. The Indian banks have actually funded these transactions. So, the Reserve Bank of India’s stance in terms of the CRR hike is not going to affect our financing. We have been lucky enough to manage a very competitive pricing as far as the acquisition is concerned.

Q: What about the financing cost for other projects for which you will need money domestically? Are you seeing a constraint over there if you have to raise money domestically in the next 12-24 months?

A: As far as GMR is concerned, we do not have any pending financing except for our Kamalanga Power Project. With the changing trends in the industry, the financing cost is expected to go slightly up. We are not an exception to what is happening in the industry. 

Q: You don’t see any of the plans going in the backburner because of rate costs?

A: Obviously not. Our projects are all long-term projects. Only Kamalanga is likely to come up for financial closure in the next 3-6 months. Otherwise, they are all at least a year away. So, we do not have any kind of an impact.