Hyderabad: Diversified infrastructure firm Nagarjuna Construction Co. Ltd (NCC), in which global private equity giant Blackstone Group and Indian investor Rakesh Jhunjhunwala hold minority stakes, may divest stake to raise the money needed to execute projects it has undertaken.
The Rs4,150 crore firm has one holding company that owns five road projects and three power projects. It has nearly Rs15,500 crore of orders on hand, and is currently executing projects worth Rs12,489 crore. It needs equity investments of Rs1,663 crore, but NCC has so far invested only Rs422.9 crore.
Vice-president, finance, Y.D. Murthy said NCC was weighing various options to raise money to invest as equity contribution in its BOT (build, operate and transfer) and BOOT (build, own, operate and transfer) projects.
The holding company, NCC Infrastructure Holdings Ltd, owns 100% stake in five road companies and three power companies, or special purpose vehicles (SPVs), that own the physical assets and orders to execute projects.
Weighing options: NCC’s vice-president, finance, Y.D. Murthy.
“The options that we are weighing now include divesting stake in the existing intermediary holding company—NCC Infrastructure Holdings—and get it listed on the bourses, creating more sector-specific holding companies to attract strategic and financial investors, or divesting holding at the SPV (special purpose vehicle) level for each project based on the need,” Murthy said.
Murthy said NCC expects to get another three or four road projects over the next year worth Rs3,500-4,000 crore, which would require further equity infusion. The new projects will raise the pie of road projects in the overall order book from the current 7% to 15%, he said.
Divesting 10-15% in the holding company may fetch Rs250-300 crore, said Murthy. “After two-three years, this holding company may have some 15-20 projects under its fold and it may fetch some Rs500 crore then if it goes in for divesting another 10%” he said.
“Another option before us is to split NCC Infrastructure Holdings Ltd into two intermediary holding companies—one for road projects and the other for power projects, so as to attract investors who are interested in sector-specific ventures,” said Murthy.
The 1,320MW coal-fired power project, coming up at Srikakulam in Andhra Pradesh, involves an investment of Rs7,000 crore and has received coal linkages and all clearances—including the environmental clearance. “The project is being funded through Rs1,700 crore of equity and some Rs5,300 crore of debt and we expect to announce financial closure in the next two-three months,” said Murthy.
NCC has approached Power Finance Corp. Ltd and Rural Electrification Corp. Ltd for debt and expects sanctions shortly.
Murthy said the company is looking at roping in strategic partners by divesting up to 49% of the equity. “However, we prefer to divest equity holding only after achieving financial closure so that we get better valuations for the project,” he said.
NCC is also thinking of doubling the capacity of the project, said Murthy, by setting up another 1,320MW plant.