Projects sale will reduce debt by Rs 1700cr: Gammon Infra

Gammon Infra has sold its stake in nine projects (six road and three power projects) to Brookfield & Core Infra India Fund, a move that will fetch it Rs 563 crore and cut its debt, it informed exchanges today.In an interview with CNBC-TV18, Gammon chief KK Mohanty said that company's monetary benefit would be greater than the Rs 563 crore amount mentioned in the release."We will get Rs 100 crore [upon those projects achieving certain] milestones. They have waived off advances of Rs 285 crore to us. And in future, we still have some interest left in the past past contingent recievable dues," he said.Mohanty said that six projects were operational and generated a top line of about Rs 550-600 crore."Our other projects are in implementation stage and become operational soon," he said.Below is the transcript of the interview on CNBC-TV18.Latha: This sale gives you that Rs 563 crore but will it also take away from your revenues? Were these nine projects revenue generating projects?A: This is little more larger than Rs 563 crore. If you read the fine print, we have still some economic interest and are involved in the projects in other ways. We will get Rs 100 crore [based on achievements of] milestones, we are waiving off Rs 285 crore advances to us and besides that, in future, we will get 75 percent of past receivable dues.Latha: What was the last one?A: We will get the past contingent dues 75 percent of that in future. We still expect to get that. Reema: What is the value of these past receivable dues?A: These are contingent so to put a number will not be correct. However, yes there are a large number of dues.Latha: Your loans are waived –Rs 285 crore? What is the waiver?A: Those are the loans which are taken from the operating assets to the HoldCo and those are getting waived. So practically that Rs 285 will go out of our balance sheet also. Latha: So the total gain to the balance sheet would be?A: We will get Rs 563 crore cash, Rs 285 crore loan waived, Rs 100 crore milestone payment and Rs 1,700 crore debt will go out of the balance sheet. Reema: This additional Rs 100 crore which you are going to get based on milestone what are these milestones?A: There are certain approvals expected because some projects were delayed. If that delays are condoned and approval is given, so we will get that Rs 100 crore.Latha: Now how much revenue may you lose because of nine projects going on? How many of them were revenue generating?A: There are six projects are operational so naturally those revenues will go. However, I need to clarify that our strength area is in operating build-operate-transfer (BOT) assets. We are an infrastructure player: we construct infrastructure, bring it to maturity stage and then maybe divest and move into the next phase or do newer projects. Latha: I take that point but just to get the profit and loss (P&L) impact right.A: These core assets will have a topline of nearly Rs 550-600 crore. Reema: At the EBITDA level what was the contribution?A: EBITDA level will be 55 percent or so. Latha: That won’t affect your ability to finance current loans? A: Not at all, because loans are getting going with that and the other projects are on the implementation stage and will come to operation in some time.Latha: What are you going to do with that entire Rs 563 crore plus Rs 100 crore that you will get as cash?A: We will take this to our board, to debate and see how best we can utilise this fund to give a better return to our stakeholders. However, the options like, there are large number of distressed asset in the country today. So, we can always look at some of the inorganic growth while occurring some of the distressed assets. Some of the new, like Smart cities and other road assets are being bided so we can be slightly wiser with our last experience and bid selectively and take better projects. The primary advantage we will get is the existing projects, the balance projects which are left we can focus on them and bring it to a better health and maturity stage which can give a equally much attractive value than the what we might be given of today.Latha: I am interested in this larger story of Brookfield and Core Infra India Fund. What is the profile of this fund and are we going to see more purchases by these and other companies? What I am trying to find out is – is there more relief to the road sector itself because funds are invested?A: That is the biggest advantage of this deal not only to our company, my team or myself personally but to the country and to the sector. This is a path breaking direction for the new investors coming to the road sector. The government and the project management office (PMO) and the road ministry is taking so much of initiative this needs to translate into some visible action where the investors are getting attracted. Brookfield is one of the largest global players in the infrastructure sector having more than 200 billion assets. They are listed in New York Stock Exchange and Toronto Stock Exchange. They have multiple assets in different developing and developed countries. So they operate into port, power and road sectors so this is a very heartening message to the industry that lot of investors can be attracted if things are moving in the right direction. This is one of the fast deal which is giving you a new direction.