GMR Infra to raise Rs 1,500 cr through rights issue

Bangalore-based publicly-held infrastructure developer GMR Infrastructure plans to raise Rs 1,500 crore in equity through a rights issue, which, along with the recently-concluded qualified institutional placement issue of Rs 1,500 crore, is expected to ease leverage.

For the past two years, GMR Infrastructure has been grappling with debt of Rs 40,000 crore with a gearing of four times. After the rights issue, which is expected by November, GMR’s net worth will go up to Rs 14,000 crore as a result of which the leverage will be down to 2.85 times.

The move to raise equity of Rs 3,000 crore in quick succession comes after a year during which GMR went about aggressively to trim its assets across airports, power projects and highways, which enabled it to infuse liquidity into its system to the tune of Rs 3,500 crore.

GMR Infrastructure’s promoters through their main holding company GMR Holdings have parallely raised a debt of Rs 1,000 crore from global private equity major KKR (Kohlberg Kravis Roberts) to fund their share of the rights issue.

The global investment firm said it has signed a term sheet to provide Rs 1,000 crore of structured long-term financing, with co-investors to GMR Holdings, which holds 64 per cent in GMR Infrastructure.

Grandhi Kiran Kumar, group director of GMR Holdings and managing director of GMR Infrastructure, said: “The infusion of additional equity from the promoters of GMR Infrastructure is a testimony to the promoters’ confidence in the long-term value of the group’s business. The rights issue, after successful conclusion, will improve the net worth of GMR Infrastructure and bring down the net debt-to-equity ratio to 2.85 against 3.5 prevailing as of March 2014. In addition, it will reduce the corporate debt of GMR Infrastructure. The partnership with KKR helps GMR strengthen its foundation for the next phase of growth.”

In addition to strengthening the balance sheet of GMR Infrastructure, the proceeds from the rights issue will also be used to support the funding requirement for projects and meet its financing obligations. Neither KKR nor GMR Holdings specify the terms of the contract. GMR Holdings is already under a debt of Rs 1,000 crore with as much as 73 per cent of that in short-term borrowings.

B V Krishnan, managing director, KKR Capital Markets, said: “We are delighted to have entered into this partnership with GMR, which represents a significant opportunity for KKR to partner with committed infrastructure groups.”

In India, KKR provides structured financing solutions through multiple capital pools, including a non-banking finance company, alternative investment funds and special situations capital pools. The firm looks to provide flexible, long-term capital, which can help companies achieve their objectives of balance sheet consolidation, de-leveraging and long-term growth.

KKR has executed more than $2 billion of structured financing to 21 business groups in India through its credit and capital markets business over the past five years.