Stake sale to Brookfield to make us cash surplus: Gammon

KK Mohanty, managing director, Gammon Infra says the company currently has a debt of Rs 4,000 crore. However, he hopes to be cash surplus post the 9 assets' stake sale to Brookfield.Below is the verbatim transcript of KK Mohanty’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Ekta: I wanted to ask you about Gammon India considering that is a holding company of Gammon Infrastructure and that one is now under strategic restructuring debt (SDR). How does that impact you?A: They are our 58 percent stakeholder and the holding company. So as their financial health will improve perceptionally it will help a capital hungry company like ours which require huge capital for implementing any of the infrastructure projects. So, from that angle any improvement in their financials structuring and financial health will only have a positive impact on their subsidiary like ours.We cannot implement any public private partnership (PPP) project without having fresh debt or fresh equity. So, equity and debt to be raised naturally you have to have good strong parent which will help you always.Anuj: About Gammon Infrastructure now, what kind of debt do you have right now and do you plan to cut it because the stock has reacted quite negatively all through this year?A: I cannot reflect on the stock situation because the market has been very volatile in the recent past. However, I can surely say that we have around Rs 4,000 crore debt. We have around seven-eight operational projects out of that we are under agreement with Brookfield for selling nine project assets -100 percent stake sales; three power projects and six road projects that will make us a cash surplus company. We expected this to be a very strong position in the present market situation.That will help us in further improving our consolidated position by completing newer projects also which are slightly stuck in recent past. So, we will like to complete that. Recently we have also completed two projects like Godavari Bridge and a renewable energy project, Bagasse power plant of 30 megawatt in Maharashtra and in Pravara. So those two projects has been completed that will also add to our top-line presently.Ekta: Talking about the divestment for example what is the interest that we are seeing right now in the market for assets to be picked up? Are there almost distressed sales that are happening?A: I will not term it as a distressed sales but yes for the investors who are trying to enter this market it is a very opportune time. From that angle, it should be very exciting for the people who are inclined to enter Indian market and specially the infrastructure market.Yes, it is slightly skewed towards buyers market rather than sellers market. That position is very clear. There are not many buyers and even if the buyers are talking about deals that is not getting completed first.Ekta: You all have announced divestment of assets but are you all considering any more divestments in the future? Any interest which has been showcased for the company?A: First of all let us complete this deal. This is quite a large deal not only for us in the industry itself. I think this type of deal in recent past has not been closed in the road or in the infrastructure segment. So we will try to complete it. However, as a business model our job is to create economic value around new infrastructure projects.As we move ahead we churn it out and monetise it and move into a newer assets. So that is the way the business model is so we will continue taking newer projects and whenever there is any economic value offered to us in any project, we will try to exit out of it. That is the normal business model of the company.Ekta: What is the tendering pipeline looking like?A: Even after the new government came into power though there is a lot of initiative taken at the macro level, their micro level is still crying for some level of performance. Not many PPP projects have been bided out presently. Now railway is being talked about or road being talked about, smart cities being talked about so we need to wait and see what are the things being rolled out.Depending on the opportunity available with this deal happening we will be a cash surplus company. So, we will have appetite for more number of newer projects.