Hyderabad: The city-based GVK Power and Infrastructure Ltd, which is modernizing the Mumbai international airport, is restructuring its businesses to raise more money, said its top official.
Private equity play: GVK group chairman G.V. Krishna Reddy.
“We are planning to restructure all our infrastructure businesses and form a few intermediate holding companies, which in turn will have subsidiaries, so that we can raise funds in an efficient manner whenever required,” GVK group chairman G.V. Krishna Reddy told Mint.
The company operates in several infrastructure segments that include power, airports, seaports, roads, coal mining, urban infrastructure and special economic zones, or SEZs. It has recently announced plans to enter oil and gas. Through a separate set of consortium partners, the firm has also bid for city railway projects in Mumbai and Hyderabad.
The company now has 10 subsidiaries and two associate entities. The subsidiaries include GVK Industries Ltd, GVK Jaipur Expressway Pvt. Ltd, Alakananda Hydro Power Co. Ltd, Goriganga Hydro Power Pvt. Ltd, GVK Power (Goindwal Sahib) Ltd, GVK Coal (Tokisud) Co. Pvt. Ltd, GVK Airport Developers Pvt. Ltd, GVK Airport Holdings Pvt. Ltd, GVK Aviation Pvt. Ltd and GVK Infratech Pvt. Ltd. The associates include Gautami Power Ltd and Mumbai International Airport Pvt. Ltd.
After going public through an initial public offering in January 2006 to raise Rs256.54 crore, the company went in for equity placement with the qualified institutional buyers and raised $300 million (Rs1,218 crore) in last fiscal year that ended on 31 March.
On last count, the promoters hold 64.19% of the equity, foreign institutional investors 12.21%, banks, financial institutions and mutual funds 7.65%, while others including the public hold 15.23%.
“We currently have around Rs20,000 crore worth of projects on hand and have firmed up funds to execute all of them. But now we are looking at several new larger projects that will require huge amount of investments,” said Reddy.
Stating that the company cannot pump in equity entirely on its own for larger projects, Reddy said, “While going in for larger projects such as oil and gas, metro rail projects and seaports, we will have to rope in private equity players, and even retail investors, along with the support of institutional funding. However, we will ensure that we retain controlling stake in all such ventures.”
When the infrastructure subsidiaries grow bigger, the company will spin off them into separate intermediary holding companies, said GVK group chief financial officer Issac A. George.
“Internationally, the practice is to have intermediate holding companies for different verticals for raising funds, without diluting the stake of promoters in the overall holding company,” he said. “What we are doing now is forming intermediate holding companies. To begin with, we are going to have three intermediate holding companies for the three key verticals now we are into — energy, transportation and urban infrastructure,” George added.
“The idea behind this exercise is to bring in sector-specific investors into each of the verticals,” said Reddy.
George said these investors could be private equity firms and even retail investors.
“Eventually, we may raise required funds for each of these intermediate holding companies through public issues and list them on the bourses. The current exercise of corporate restructuring is to keep these key verticals ready with the necessary corporate structure so that we can raise funds whenever required,” he said.