Plans to sell some assets to reduce debt

GMR Infrastructure’s operations in the power sector have been facing several challenges, said GMR’s Group Chief Financial Officer A. Subba Rao.

Addressing a post-quarterly results conference, Rao said: “The infrastructure sector, and particularly the power sector, is going through the toughest of times now. I have never seen such a situation in the sector in the last 13 years.”

The company has invested in significant power generation capacities, but unfortunately it is not able to put them to use because of non-availability of gas.

Fuel issues

“The power sector has been plagued with issues relating to gas availability, because of which our plants are under-performing,” he said.

In addition to non-availability of gas, the capital market has been posing many challenges in terms of the ability to raise capital in the given business environment, Rao said. “To fund the equity we had to borrow in lieu of the equity, which has also put an additional burden on our balance-sheet,” he further added.

“Right from the fuel (natural gas and coal) availability to discounts, distribution and realisation of receivables for the power supplied, we have been affected. Other sectors, however, are doing well,” explained Rao.

The company is planning a partial dilution of its assets. Rao said this has been planned to bring down the losses, debt level and interest burden. The GMR Group has a net debt of Rs 35,000 crore.

“Considering the group’s commitment towards value creation, we have adopted this strategy which will build upon the expertise we have developed over the years to shore up revenues and improve business,” Rao added.

Asset dilution

“The company had begun evaluation of its assets. In the next two-three months we will know the results of our endeavour to pursue this model.”

“In addition to assets for dilution, we are planning to pick up minority stakes in a few sectors and back them up with our expertise,” Rao said. “We have not set a target yet.”

(This article was published on November 15, 2012)
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