Mumbai: A wholly owned subsidiary of Mumbai-based construction firm Gammon India Ltd, Gammon Infrastructure Projects Ltd will sell fewer shares than previously planned in an initial public offering (IPO) after its valuation rose on a doubling of projects it is executing since it first filed documents for the float in March last year.
“The number of shares being sold in the public offer will be as low as possible and would be closer to the minimum mandated by the market regulator for such offers,” said a company executive who did not want to be identified because the company has not yet informed stock market regulator, Securities and Exchange Board of India (Sebi), about the change.
Indian securities rules mandate firms going public to sell shares equivalent to at least 10% of their equity in IPOs.
Gammon Infrastructure, the holding company for Gammon’s investments in infrastructure businesses that range from ports to roads, bridges to power units, had filed a prospectus with the markets regulator around March 2006 to raise around Rs300 crore from a public float of shares.
According to the filing, the firm planned to offer more than 27.15 million shares of Rs10 face value each at a premium to be decided through a bidding process. This would have constituted 17.50% of the fully diluted post-issue equity capital of the firm with a ‘greenshoe’ option (of selling more shares against demand) of an additional 2.11%.
“At the time of filing the draft prospectus, we had seven special purpose companies executing projects in roads, ports and hydropower sectors. We have since won six more projects and have emerged successful bidders for two (other) port projects in Gujarat,” the executive said. As the valuation has gone up, the company is selling lesser number of shares, he added, while declining pricing details.
SSKI Corporate Finance Pvt. Ltd, DSP Merrill Lynch Ltd, JM Morgan Stanley Financial Services Pvt. Ltd were hired to manage the float.
Gammon Infrastructure has stakes in the Rajahmundry-Dharmavaram highway project, Dharmavaram-Tuni highway project, Vadape-Gonde Road project, Vizag Seaport Pvt. Ltd that operates two multipurpose berths at the Union government-owned Vizag port, New Mattancherry Bridge project in Kerala, Rangit 11 Hydro-electric power project in Sikkim and a biomass power project in Punjab. A joint venture between the Gammon firm and a Spanish port operator Dragados SPL SA has won the rights to develop and operate a Rs1,200 crore container terminal for 30 years at the Union government-owned Mumbai port.
The proceeds from the share sale will be utilized to fund the company’s share of the equity for developing new highway and port projects worth about Rs2,000 crore, the executive said. Gammon Infrastructure plans to list its shares in the next two months.
Construction firms are spinning off their infrastructure business into units and listing them on the stock exchange in a bid to realize untapped value. Economic growth has fuelled demand for infrastructure services, which, in turn, has led to increased demand in sectors such as power, roads, ports and telecom.