New Delhi: Maytas Infrastructure Ltd is looking to sell a small stake in the Rs12,312 crore Hyderabad Metro project to Infrastructure Leasing and Financial Services Ltd (IL&FS), which already owns a 5% stake in the project, in an attempt to combat a cash crunch and get the project off the ground.
A Maytas executive, who did not want to be identified, said the company was discussing the stake sale with IL&FS, but declined to put an exact number to the deal-in-the-making. “We are trying to persuade IL&FS to increase by a couple of percentage points. They are favourably looking at it.”
Another executive familiar with the developments at the infrastructure finance firm confirmed the move and said that although IL&FS was yet to approve the transaction, he didn’t see any problems in it doing so.
A company official, who did not want to be identified, said the firm was in preliminary discussions to persuade IL&FS, which already holds 5% in the Metro project, to buy some of Maytas’ stake in it. This person said that IL&FS had wanted a larger stake in the project when it was conceived, but had to settle for 5%.
The stake sale will result in an infusion of equity that could allow the project reach a so-called financial closure—or the mobilization of funds required. The Maytas-led consortium that won the bid to develop the project has already missed one deadline for this and is now scrambling to meet a 30 June one.
The equity infusion will help Maytas, said an analyst. “It means that the equity to be put out by Maytas will be that much lesser. If you look at a debt-equity ratio of 3 to 1 (for the project), then it is Rs3,000 crore of equity,” said Vijay Kumar, an analyst with Spark Capital Advisors (India) Ltd.
Maytas is promoted by the family of B. Ramalinga Raju and its financial troubles began in January when Raju, also the founder of Satyam Computer Services Ltd, confessed to having cooked the software firm’s books to the tune of at least Rs7,136 crore. That announcement curtailed Maytas’ ability to raise or service debt, and it ran into trouble with lenders who petitioned the government to sack its board much like it had done Satyam’s.
The government, however, merely appointed four new directors onto Maytas’ board, which subsequently approved the formulation of a corporate debt restructuring package to revive the firm. Meanwhile, Maytas continued to lose customers.
In a related development, ICICI Bank Ltd, one of the banks that has loaned money to Maytas, has sought representation on the firm’s board, according to a senior executive at Maytas.
“Maytas Infra did receive a letter from the ICICI Bank recently seeking representation on the board. The company has forwarded it to CLB (Company Law Board) for its decision and we are awaiting a reply from CLB,” said K. Ramalingam, the government-appointed chairman of Maytas Infra.
ICICI is the second lender in recent months to seek representation on the Maytas board. IL&FS in February failed to obtain a board seat after approaching CLB.
Maytas, with a 26% stake, leads a consortium of four firms that bid for the Metro project. Navbharat Ventures Ltd holds 16%, Italian-Thai Development Public Co. Ltd and IL&FS each hold 5%, while the Andhra Pradesh government holds 11%. The balance 37% was to be shared among financial partners that invested in the project.
“We have started discussions on financial closure. We are also going to ask for an appointment with the (Andhra) chief minister (Y.S. Rajasekhara Reddy) now that the government is in place,” the Maytas executive mentioned in the first instance said.
Maytas has Rs1,700 crore of debt on its books and an order book of Rs8,500 crore, apart from the Metro project. Its net worth, as on March 2008, was Rs653 crore. On Thursday, Maytas shares rose 4.92% to Rs60.75 each on the Bombay Stock Exchange on a day the Sensex dropped 2.31%.
C.R. Sukumar in Hyderabad contributed to this story.