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Home / Companies / GMR completes stake sale in Ulundurpet project, cuts debt by `450 crore

Mumbai: Bangalore-based infrastructure conglomerate GMR Group on Tuesday said it has sold its 74% stake in GMR Ulundurpet Expressways Pvt. Ltd to India Infrastructure Fund (IIF) of IDFC Ltd.

GMR Ulundurpet Expressways operates a stretch of about 73km from Tindivanam to Ulundurpet on National Highway 45 in Tamil Nadu. The project started commercial operation in July 2009.

“GMR and IIF have signed a definitive agreement on 17 September 2013 and the transaction was concluded on 17 February 2014 upon receipt of all necessary approvals, and realization of sales proceeds amounting to 220 crore," GMR said in a statement.

This sale releases capital amounting to 198.75 crore and reduces debt to the extent of 450.67 crore from the consolidated balance sheet of GMR Group.

“The focus of the group continues to be creating liquidity and reducing our leveraged position, for the benefit of all stakeholders," said Madhu Terdal, group chief financial officer of GMR Group.

The sale comes when delayed government approvals, problems related to land acquisition, and a funding crunch due to high borrowing costs have pushed a number of developers to monetize their assets.

The road sector saw a slowdown with just 1,322km of projects awarded by the ministry in 2012-13 compared with a target of 9,500km. Slower economic growth has led to a decline in road traffic and raised questions over the viability of a number of road and highway projects.

The roads ministry also lowered its internal target for the award of road projects for the second time this fiscal year. The 2013-14 target for awarding highway projects under the National Highways Development Project was slashed to 2,128km from an earlier 4,028km and the even higher original target of 7,500km.

Since January 2013, around 10 Indian companies have either sold or announced the sale of assets in a bid to pare down 3.58 trillion in debt, according to Mint research and an August report by Credit Suisse Securities Research and Analytics.

In an October interview, Reserve Bank of India (RBI) governor Raghuram Rajan said that if liquidity-strapped entities manage to raise some money, they could start bidding for projects besides fulfilling some of their past commitments.

On 10 February, Mint reported that Madhucon Projects Ltd, a Hyderabad-based road developer, plans to sell at least 74% stake in Madhucon Agra–Jaipur Expressways Ltd to IDFC Alternatives Ltd, the private equity (PE) arm of IDFC Ltd.

Madhucon Projects’s plan to sell stake in Agra-Jaipur Expressways comes at a time when nearly 50 roads projects are up for sale in the country, according to Sandeep Upadhyay, senior vice-president (infrastructure solutions group), Centrum Capital Ltd.

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