With stake sale, GMR Energy's debt load to become negligible

MUMBAI: GMR Energy , which filed for an initial public offer (IPO) two years ago and then withdrew it in view of poor market sentiments, is now well-funded and would look to tap the capital market only after the next 2-3 years, a top executive told ET.

The company announced on Friday that it would sell 30% stake to Malaysia's Tenaga Nasional Berhad for $300 million (about Rs 2,000 crore). This financing will help the company pare debt and improve cash flows.

“We have been pursuing this transaction for the past two years, because we wanted a strategic investor who complements our positions. The money from this deal will be used to repay debt so that the corporate debt for GMR Energy is almost negligible,“ GBS Raju, chairman, energy , GMR Group, told ET in an interview.

The company's debt will stand reduced to less than Rs 500-crore post repayment. Like its peers in the power sector, the company has been struggling with mounting debt and muted cash flows and the debt repayment will be a shot in the arm.

“Now that we have a strategic investor, we would like to consolidate our existing assets in energy and bring in operational efficiency. With Tenaga coming in, there is a lot of opportunity for us to improve the bottom line of the company,“ Raju said.

GMR Energy, part of the GM Rao-promoted GMR Group, has 2,300 mw of operating capacity and another 2,000 mw under development that has not achieved financial closure. Weighed by debt and struggling to complete projects due to various challenges, the group had adopted an 'Asset Light-Asset Right' strategy 2-3 years back and plans to tread carefully while going ahead.

It plans to foray into operations and maintenance (O&M) services for power projects, which will not be capital-intensive, as other businesses will provide the company fee-based revenue.“We are exploring O&M services and will focus on it for the next 24 months.

Then, we would explore the renewable energy space. There are still a lot of challenges but we would like to be careful and would use our past learnings to grow in 2-3 years,“ Raju said.

The company currently has 25 mw of solar power capacity. Besides solar, it is also keen to develop hydropower projects.