Rising debt dampens GVK's dream to buy Australian mine

GVK Power and Infrastructure's dream to acquire Hancock Coal Mines in Australia has hit rough weather, thanks to high working capital requirement and a rising interest burden. CNBC-TV18's Appaji Reddem and Anchal Gupta report.

GVK's investors are not a happy lot. Infrastructure stocks have taken a beating, and not to be left out, the GVK stock has plunged 60% over the last 12 months. For one, the company's debt is already above Rs 5,500 crore. Second, the company's plans to buy a 30-50% stake in Australia's Hancock mines mean GVK needs USD 1.2-1.3 billion to seal the deal, and an additional USD 3 billion in working capital over the next three years. Analysts say that to get these funds, GVK will have to dilute at least 11% equity. But GVK disagrees. Isaac George, chief financial officer of GVK Power & Infrastructure, said, "We are not contemplating dilution of equity at any stage. Also, Rs 5,500-crore debt for a company of our size is not worrisome. We have very comfortable debt equity and service levels. And, we have a very comfortable EBIDTA to total debt." A recent JP Morgan reports say GVK is looking at a total investment outlay of USD 6.2 billion