Mumbai:
INTEREST REVIVAL Brookfield-led consortium has agreed to buy debt-hit Gammon's 6 road & 3 power projects; deal to be one of the biggest in infrastructure space
A consortium led by Brookfield Asset Management has agreed to buy the MumbaiNashik highway and eight other projects from debt-laden Gammon India for about ` . 3,000 crore, in one of the biggest deals involving infrastructure projects.
The proposed transaction, comprising debt and equity , is one of the first in the roads sector after the government eased exit rules for developers. This could also be the beginning of numerous deals in infrastructure projects as the Canadian firm's investment shows foreign investors are interested in the sector and that promoters are ready to accept reasonable valuations, analysts said. Such deals will also help revive the interest and ability of Indian companies to bid for more infrastructure projects.
The government's reform measures signal its flexibility in boosting infrastructure projects and this is giving comfort to investors, said Vishwas Udgirkar, senior director at Deloitte in India. “Infrastructure companies have been in a stressed financial state and international investors have been looking at India with interest.“ Deals which have been in talks will now fructify , he said.
Gammon India's infrastructure development arm, Gammon Infrastructure Projects, said it will sell six road projects and three power projects to the consortium in a deal which pegs the enterprise value at around ` . 3,000 crore. The cash flow on account of the divestment would be ` . 563 crore, while another ` . 100 crore could flow in if certain undisclosed milestones were reached. Gammon Infrastructure managing director Kishor Kumar Mohanty called this a game-changing deal for the company . “Government's decision to relax exit norms for projects has helped us in closing this deal and we expect many more such deals to happen,“ he told ET. “For us, this deal would be a game-changer as it helps us from becoming a buyer, rather than a seller. We now hope to acquire some distressed assets and also bid for new projects, something that we haven't been able to do for the last two years because of our financial stress.“
The government has allowed developers to sell 100% of road projects two years after completing them. The previous limit of 76% had acted as a big hindrance for deals as investors eyeing these projects wanted full control. The government's move could unlock investments worth about ` . 4,500 crore in the sector. “The merger and acquisition environment is changing positively but investors continue to be selective. If the policy stability continues, we expect many more deals in the infrastructure space,“ said Rahul Mody , head, infrastructure at Ambit Corporate Finance, the advisor for the deal.
Gammon India, the parent, has been in severe cash crunch amid huge debt and mounting losses.The company has been on the lookout for investors, particularly for divestment in its subsidiaries, for almost three years. Gammon India had set up Gammon Infrastructure Projects in 2001 to take up infrastructure projects as a developer under the public-privatepartnership model. The deal with Brookfield includes Gammon's prized Mumbai-Nasik Expressway project which has been on the block for over three years.
Anuj Ranjan, managing partner at Brookfield, said: “This transaction represents Brookfield's first major investment in Indian infrastructure, and provides us a great platform to participate in the Indian growth story over the long-term.“
The nine projects that Gammon is selling have a total project cost of `. 6,750 crore-. `2,935 crore on six operational projects and ` . 3,815 crore on remaining three. Of this, the company has capitalised . 3,097 crore till March 31. The out` standing debt for the projects totalled ` . 1,718 crore, which will be taken over by the new owner. This will reduce the consolidated debt of Gammon Infrastructure Projects to ` . 2,229 crore.
Most infra developers had stopped bidding for new projects since they are cashstrapped with severely leveraged balance sheets. The number of companies bidding for each BoT road project had slipped to as low as three to five from about 20 during 2011-12.
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