Will sell stake in subsidiaries for right offer: GVK's CFO
"As a standard policy, we will offload stake in our subsidiaries to raise equity and reduce debt as and when the opportunity comes up," says Issac George, chief financial officer, GVK Power in an exclusive interview with moneycontrol.com
Shares of GVK Power and Infra have tumbled over 40 percent in the last one year, with tough business conditions hampering its airport and power divisions, although the road-project arm seems to be performing well.
The company's debt of around Rs 16,000 crore with over Rs 500 crore as annual interest outgo, is a key concern for shareholders of the Hyderabad-based infrastructure conglomerate.
Considering the fact that the company has undertaken big-ticket and long gestation projects in all its business verticals, such levels of debt are not abnormal,
"As a standard policy, we will offload stake in our subsidiaries to raise equity and reduce debt as and when the opportunity comes up," says Issac George, chief financial officer, GVK Power in an exclusive interview with moneycontrol.com.
The firm recently offloaded stake in its rail and port projects in Australia to Queensland-based Aurizon Holdings for an undisclosed sum. The company is also in talks with investors to sell stake in its mining business in Australia.
On the domestic from, the company is looking to rope in investors for its airport, road and power divisions. The company is particularly bullish on its airport business after the Airport Economic Regulatory Authority (AERA) allowed the company to continue levying airport development fee (ADF) at Mumbai airport for another eight years.
"Due to a clear tariff structure, many investors have evinced interest in our airport business," says Issac George. Along with Mumbai airport, GVK runs Bangalore airport and has undertaken two international airport projects in Indonesia.
In a significant development, the Andhra Pradesh government has allowed the company to operate two gas-based power plants on imported gas due to insufficient supply from Reliance's KG-D6 basin. "Our coal-"fired plants will continue to be under stress for some more time due to shortageof fuel," says George
Though the company has backed out of Shivpuri-Dewas road project due to regulatory hurdles, its Jaipur, Deoli and Badodara highways projects are on track, he adds.
Below is an edited excerpt of the interview
Q. Tell us about your recent stake sale in rail and port projects in Australia?
A. We have offloaded 51 percent stake in our rail and port projects in Austria to Queensland-based Aurizon Holdings Ltd to unlock value in the Galilee Basin coal reserves. Aurizon will buy a majority stake in Hancock Coal Pty. Ltd that owns GVK Hancock’s rail and port projects. Aurizon will pay a portion of the total sum on completion of the transaction and deferred payments at the financial close of each phase of the projects.
Q. Are more stake sale developments in your various businesses in the offing?
A. As a company policy we will divest stake at an appropriate time. For instance, investors have evinced interest in our mining assets in Australia, we will take a call on it after due diligence. Also, after the airport regulator allowing us to collect airport development fee, our aviation business has become an attractive preposition for buyers.
Q. Will stake sale help retire debts or de-leverage books?
A. It is our philosophy to sell stakes to bring in additional equity which will partly help retire debt.
Q. Will you take back projects from National Highways Authority of India (NHAI) which you had exited citing hurdles in environmental clearances?
A. The matter is sub-judice and hence we cannot offer any comments on it.
Q. Will the current quarter be different than Q3 in terms of fuel shortage?
A. Fuel shortage will continue to impact power plants even in current quarter.
Q. Do you see company exiting FY13 in green?
A. We will be profitable in the current year on a consolidated basis. We have done well overall.
Q. Can you give us sector wise outlook in your roads airport and power businesses?
A. A 30 MW hydro project is being developed on the river Alaknanda in Tehri/ Pauri Garhwal District of Uttarakhand. The construction of this project is nearing completion. Another 540 MW) thermal power project is under development near Goindwal Sahib Village, District Tarn Taran in the state of Punjab. By 2014, we will be producing 870 MW energy. Our Bangalore and Mumbai Airport will continue to grow.