Targeting topline growth of Rs 1000 crore: Gammon Infra

Gammon Infra has six operational assets with positive cash flows. Three of its projects are on the verge of completion, but will require Rs 100 crore for completion. Mohanty says Mumbai-Nashik remains a profitable toll project for the company.

Gammon Infra is targeting topline growth of Rs 1000 crore.

Below is the verbatim transcript of KK Mohanty's interview with CNBC-TV18’s Latha Venkatesh and Sonia Shenoy

Latha: Just a while ago the Gammon India management increased its stake in Gammon Infra, can you just take us through what were those equity changes that happen between Gammon India, Gammon Infra and Gammon Power?

A: The only public information which is available is Gammon India is transferring its Gammon Infra holding to Gammon Power.

Latha: What is the purpose of this change?

A: They are in a restructuring process due to the present difficult situations and as a part of this restructuring process, all the asset-based investments are going into one structure and EPC is into other block.

Sonia: So how much does Gammon India currently hold in Gammon Infra and post this particular transfer what will the promoter holding be in Gammon Infra?

A: I will not be able to answer because I am not the stake holder. Gammon India is the stake holder but yes presently Gammon India with its subsidiary holds around 75 percent, as far as my knowledge goes they propose to transfer the total holding to Gammon Power.

Sonia: What will the quantum be of funds that would be raised or this is just a transfer?

A: Yes it is a transfer, it is a 100 percent group subsidiary.

Latha: Gammon Power is a 100 percent subsidiary of Gammon India so they are transferring it from Gammon India to their own subsidiary.

A: Yes it is a restructuring process because the EPC block will be one and the investment block will be the other. Gammon India will remain the EPC block.

Sonia: What is the reason for this restructuring?

A: The business is getting jumbled up with the investment and into the EPC business so the EPC business might still have a lot of potential in the future with the new government coming in. That business may not suffer with few of the investments not doing well.

Latha: You said the EPC projects have been retained with Gammon India.

A: That was the discussion.

Latha: What are the non-EPC projects?

A: Gammon Infra, some piece of real estate and other investments.

Sonia: Can you give us an update on your debt as well, I mean as of June your debt stands at a little under Rs 4700 crore, what could the repayment of debt look like?

A: Gammon Infrastructure we have nearly Rs 5500 crore debt because this is an asset based business. This debt is not in Gammon Infrastructure balance sheet, it is in a consolidated balance sheet, it is into special purpose vehicles (SPVs).

Latha: Can you just highlight the important assets that you have which are generating money now?

A: We have around six operational assets, all of them are doing positive cash flows. In the road sector we have four annuity projects which sustain on its own and we have one toll project in Mumbai-Nashik and we have Vizag Port that is also operating for last seven-eight years and it is doing well.

Sonia: The company board had approved a QIP of around Rs 500 crore. Can you take us through what amount of dilution this could lead to, what will the funds be used for in terms of which are the projects etc that the funds could be pumped into?

A: Board has given approval for Rs 500 crore QIP so up to Rs 500 crore we can raise through QIP. Presently we are in discussion with the merchant bankers to complete the process.

The funds are required for two things, one is in the HoldCo balance sheet we have some debt. We want to deleverage that, retire that because in HoldCo we have no direct activity so we don't want to keep any debt that is one part. Second is we have three projects on the verge of completion in next couple of months time. The projects are Godavari Bridge in Andhra Pradesh, then we have Hajipur-Muzzaffarpur highway project of NHAI in Bihar and we have Pravara Nagar 30 megahertz co-generation power project which is on the verge of completion. All the three projects will get completed in this financial year. For that we need around Rs 100 crore additional funds.