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Interups Inc, the New York-based fund led by Indian born Laxmi Prasad, has begun talks to buy 49 per cent stake in Gayatri Projects Ltd as the engineering, procurement and construction (EPC) focussed infrastructure firm struggles with severe cash flow issues in the wake of the pandemic, multiple sources said.
BusinessLine could not ascertain the deal size. The deal, when finalised, will trigger an open offer in the company as per SEBI taker over norms.
Mumbai-listed Gayatri Projects said on Saturday it is exploring funding options to manage the tight liquidity situation arising from cash flow mismatch.
“Accordingly, the company has been approached by an overseas investor for exploring fund infusion options in the company,” Gayatri Projects said in a regulatory filing without disclosing the name of the investor.
“As part of preliminary discussions, the company has signed a MoU with the said investor on July 23 to start a due diligence process with a 90-day exclusivity period for signing definitive documents,” it said.
Promoter and promoter group holds 44.66 per cent stake in the company while the remaining 55.34 per cent is with the public.
On July 17, Gayatri Projects informed the stock exchange that it owed Rs 2,014.88 crore to banks and financial institutions of which it has defaulted on Rs 201.72 crore.
As per the deal structure being worked out, Gayatri Projects will allot shares on a preferential basis to Interups, which expands the equity base and add to the current share capital of the Hyderabad-based company.
Between the promoters’ shareholding, the original promoters will hold 51 per cent and Interups will have 49 per cent.
Apart from this, there will be a minimum public holding of 26 per cent as per SEBI guidelines.
“Technically, whenever the capital is expanding which will be done in a phased manner, because there is some portion of debt that would be zeroed out, 26 per cent minimum public float has to remain or Gayatri Projects will have to bring the public holding to 26 per cent within 12 months from the date of expansion,” a banker briefed on the plan said.
At all times, the minimum public shareholding that is required as per SEBI norms will be maintained and the balance equity will be split in the ratio of 51:49.
Gayatri Projects has an order book of Rs 13,000 crore and the company is expecting order inflows of as much as Rs 4,000 crore during the fiscal.
In a June 15 investor presentation, the company said the pandemic-induced cash flow challenges continued due to delayed payments from state governments. Besides, mobilisation advances on new orders have been delayed due to office shutdowns and delays in detailed project report (DPR) preparation after the second wave.
“We are taking multiple steps to ensure our liquidity eases,” managing director T V Sandeep Kumar Reddy said in an earnings’ call on June 15. We have reduced our long-term debt by 25per cent in FY21. We hope to become debt free in the next two years, he said.
“There has also been a significant interest cost reduction on account of our negotiation with banks and we were able to reduce our interest cost by over 250 basis points. This year we have paid about Rs300 crores of interest. We are expecting about Rs200 crores of debt repayment in FY22,” Reddy said.
Laxmi Prasad declined to comment. T Rajiv Reddy, Head – PMC, Gayatri Projects did not respond to calls made to his mobile seeking comment.
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