GVK Power and Infrastructure Ltd, the builder of the Rs6,000-crore Mumbai International Airport project, has raised $300 million, or Rs1,230 crore, placing shares with institutional buyers to part finance its ongoing infrastructure projects.
Shares of the company rose to their highest in a year on the Bombay Stock Exchange, rising nearly a tenth to Rs366.50.
Through bids that closed on 9 May, the company issued 37.5 million shares of Rs10 each at a price of Rs325 each to ‘qualified institutional buyers’ that the company declined to name.
“We will be deploying these funds in our ongoing projects worth around Rs18,000 crore that are at various stages of implementation which include power, roads, airports, coal mines and others,” the GVK Power and Infrastructure director G.V. Sanjay Reddy said.
The GVK Group of companies, headed out of Hyderabad, is midway into a restructuring exercise that involves bringing into the fold of the listed GVK Power and Infrastructure six of the group’s closely-held group companies.
These companies include Bowstring Projects and Investments, Green Garden Horticulture, GVK Jaipur Expressway, Alaknanda Hydro Power, GVK Power (Govindwal Saheb), Goriganga Hydro Power and GVK Coal (Tokisud) Co.
The holding of the group’s promoters—led by chairman G.V. Krishna Reddy—will go up to 82% from 65% earlier on account of the restructuring, said GVK’s chief financial officer Issac A. George. “The funds raised will be invested in equity of the six entities that are coming into the fold of GVK Power and Infrastructure.”
An analyst said the funds infusion was positive for the GVK companies but investors would expect information on fund utilization. “There should be visibility as to the exact allocation of these funds across the six subsidiaries. Also the high leverage would continue to be a cause for concern as apparently these funds would not be used for retiring debt,” said Nitin A. Khandkar, senior vice-president of research at Mumbai research house Keynote Capitals Ltd.
Following the consolidation, all the infrastructure assets in power, airport, road and mining would come under GVK Power and Infrastructure, which prior to the restructuring only had power businesses. The total size of projects under the company would touch nearly Rs18,050 crore from Rs3,625 crore.
The equity holding of GVK Power and Infrastructure will change on placement of shares with the institutional buyers. Promoter holding in the company will come down to 60.95% now from 82% on account of the placement, CFO George said. While the institutions will now hold 22% equity in the company, the balance 8% will be held by retail investors and 9% by shareholders of other GVK group companies.