Debt a worry for GMR Infra despite two stake-sales

The recent divestment in two projects will help infrastructure conglomerate GMR Infra ease its consolidated debt burden of Rs 37,681 crore (December end 2012) and fund under-construction projects.

On Monday, GMR Infrastructure sold its entire 70% stake in an 800 MW power plant in Singapore. The stake-sale will net the company Rs 1,356 crore, which is nearly double the investment made in the venture in the past four years. In February, GMR divested 74% stake in one of its road projects, raking in Rs 60 crore. The Singapore plant sale comes at a time when many infrastructure developers are desperately trying to divest stakes in various projects in the face of many a hurdle, one of which is valuation.

However, for GMR Infra, a standout feature in the recent deals has been rich valuations. GMR has seven under-construction projects in sectors such as power and roads for which the equity capital component will be close to Rs 2,000 crore in the next two years.

For GMR Infra, however, there are still a few operational challenges, which it will have to overcome. At the end of September 2012, the company had a debt-to-equity ratio of 4.1. From the perspective of the highly capital-intensive infrastructure sector, this ratio appears manageable. But, due to lack of cash flow visibility, debt servicing has been a problem. A major reason for this is low gas availability, which has led to operating losses at the power division over the past six months.