Gayatri Projects considering selling entire road portfolio

Gayatri Projects has decided to sell its entire road business, and is in talks with interested players, though nothing has concluded yet, the company's MD, TV Sandeep Reddy, told CNBC-TV18.

In the interview, Reddy said the company had at a board meeting earlier decided to sell only its annuity assets but the response was not great. Thereafter, it has decided to bundle toll roads along with it.Below is the transcript of Sandeep Reddy’s interview with Ekta Batra and Anuj Singhal on CNBC-TV18. Ekta: Take us through what you mean by possible hiving off of road assets and how would you like to monetise it exactly? A: There are different options. We have not yet finalised, so we are still trying to study, because as you know, we have a portfolio of road assets which have all achieved commercial operational dates (COD) and are income earning except one project which is under construction and will also start achieving income next year.But the main reason with the profitability has been low of these road assets because of the higher interest rates we are still having to pay. We are able to service all the banks which are concerned but on the net profit level, accounting losses are still there as far as the road projects are concerned. We are looking at different options of monetising these road portfolio as we mentioned that we had meeting with AMP Capital, which is a private equity player. So, based on our last board meeting, we had agreed to purchase AMP’s stake and then we have different options. So, it is still too early to come out with the options now. For now the options could be the demerging it from the Gayatri Projects, the entire road portfolio. Anuj: That point is taken. But, let me just focus on that point again, because the stock has seen a sharp intraday rally. Is this a precursor to the new exit in this business completely and will you be looking for buyers once you demerge? It looks clear that you are going to demerge it, but will you be looking for buyers for this business after that? A: Yes, of course, we are looking for buyers. We are looking at different buyers, because we have a lot of annuity assets, so asset wise, we could not find much buyers. Earlier, our endeavour was to sell the assets separately because the annuity assets, the buyers are not forthcoming so much. So, we thought that to bundle the assets along with the other assets. Anuj: What makes you confident that once you demerge this as an entire business, you will have buyers? Have you had talks with anyone? A: We are talking to a few of them, nothing really concluded. So, we know what the buyers want a kind of return to look at. See, basically if you see, the buyers are all the equity players, so they are looking completed assets which are income earning, is one thing. But, some of them like a mix of annuity and toll together and some of our toll assets are still not fully mature. So, they may take a year before, they have just started. As you said, of our seven assets, four are annuities and three are toll assets. Only one toll asset which is Western UP toll is a mature asset and we are already aware that we are actively looking at selling that asset separately. And the other two toll assets are still, provisional commercial operational dates (COD) are done and all that. So, if you separate out, then altogether, the cash flows will subsidise each other. So, it gives a better value to a buyer. Ekta: Tell us what kind of buyer are possibly negotiating with. A: We have not negotiated yet. We hope to negotiate. We know the buyers. The buyers are all the funds and also, we know what is the kind of hurdle, they look for their returns. So, ultimately, in road projects selling, you know your cash flows. Ekta: So, what is it worth right now? Your entire road portfolio, if you had to put a number to it? A: Book value investment of our total road portfolio together is around nearly Rs 550 crore of investment. We have invested Rs 550 crore, so the value is difficult to say.