We have capital for next 12 to 18 months: A Subba Rao, GMR Ltd

In an interview with ET Now, A Subba Rao, Group CFO, GMR Ltd, speaks about their debt position and other plans. Excerpts:


There are news reports that the company is looking to sell stake in the Singapore-based Island Power. Could you confirm this news for us?

Till we formally communicate any news, it is speculative and our policy is not to comment on any speculative in the market. As of now we do not have any comments on this.

When are you planning to formally communicate this news to the exchanges?

No comments.

After InterGen you are now selling a stake in?

It is speculative as of now. It is speculative.

I am just going to stay with the power business now. First you have exited InterGen, now you are looking at exiting one more or you are looking at selling stake in your one more global power business. Any reason why you are looking at de-risking your exposure to global power businesses?

No, InterGen was a specific context. The conditions have changed. There was re-emergence of Indian opportunities because of various reasons we had to exit InterGen, but that policy does not apply universally to all international assets, whether it is power or otherwise.

But nonetheless coming back to Island Power, if you could give us an indication of whether or not you are speaking with investors?

See when things are in certain stage, we do not comment, we treat them as speculative in nature. On speculative news we do not comment because it does not aide us in anyway.

No, this is not speculation. I am asking you in clear black and white, if or not you are in talks with investors?

No I cannot comment on what is happening because the several things would be in the process of progressing and that progression we would not disturb by just sharing whatever is happening on various fronts, not necessarily and this I am not neither confirming not denying here.

There is something happening that is what you cannot comment, right?

Yes, I maintain my silence.

Sometimes you got to read in between lines, but I am going to change gaze here. The big problem for GMR Group is the fat debt company currently is sitting on. How are you planning to service the debt?

No, I am not sure how do you term this as fat debt. You have to see the debt volume in association with the total volume of the assets that we have on hand and whether the debt is performing or not performing. So most of this debt is project finance debt and it is taken at the SPV level. It is being serviced by the project cash flows and all the debt is performing debt and just because today we have about Rs 22,000-23,000 crore, tomorrow it could be much more than this because once you have more assets more capital is required that is the nature of the infra industry. otherwise you cannot exclude the projects without the capital. So the more the volume of the projects, the more the volume of capital with whether it is debt or equity. So that is the nature of the infra business. What you must see whether the debt what we have on the books is performing or not. All the debt in the books is performing and all the SPVs are in a position to service through their cash flows the entire interest and the repayment of the loans.

What is the update on Island power because we believe that the construction has already started and that their plants will start operation come 2013, has the company received all fuel supplies for the plant and also what kind of revenues will this plant bring into the company?

Yes, all the approvals are in place. The total EPC contract has been tied up, the ground level activity has already started. It takes about 24 months to complete the project. It would be too difficult to forecast the revenue figures as of now and I would reserve the revenue figures because it amount to giving a guidance on a specific asset, but it would definitely add substantial revenue to the power generation revenue of the entire consolidated balance sheet and I would not be able to give any specific revenue figure at this juncture which is two years away now.

January last year you had a big analyst conference call in which you had outlined that you guys are going to raise about Rs 7500 crore by diluting stake in all verticals and list them as well and that the time line was indicated that everything would be completed by FY12. So can we safely assume due to the market conditions that all those plans would not be executed in the near future?

Last year itself we have raised more than a billion dollars in terms of equity. We have raised $315 million equity in GMR Infra. We have raised $630 million in the power sector and the airport sector in the space of the private equity. So we have raised the equity of more than a billion dollars altogether with InterGen, same proceeds together which is also available for the equity. It is more than about Rs 5300 crores cash which has been added to the equity pool of the last year. So the plans have been going on. So when we say that we raise the capital it does not necessarily mean through the public markets, it can be any capital markets.

Give us a flavour of your total net debt and what is the cost of servicing the total debt?

Net debt should be in the region of about Rs 16,000-17,000 crore. As of now I do not have as of debt figures, but it is about in the region of Rs 16,000 to 17,000 crore. The overall cost is about 10.5, so the way we function, we raise the debt we predominantly insulated the debt from the current volatility of the interest rates. In the case of the annuity road projects we have secured long term finance at the fixed rate prices. So we are paying less than 9% interest in the annuity projects. In the case of the toll projects so the toll revenue is also go up as a result of the inflation, hence the increase in revenues would offset the increase in cost on account of interest in the toll projects. In the case of the airports every cost is a kind of pass through structure because it gets collected through tariff, only in the case of the power projects where we have a kind of a market exposure. There also we take the loans at fixed price for fixed intervals. Yes they go through a kind of interest rate volatility. So that is why we are able to contain our interest rate even in this kind of volatile market, high interest rate markets, to around 10.

Which are some of your key businesses which currently require capital infusion and which are some of your key businesses or verticals you are open to a stake sale?

Airports do not require any further capital. All the airports are fully funded both in terms of debt and equity and in terms of road sector three road projects which are under execution, all the debt is tied up. We will keep drawing the debt as we progress on these projects and the equity outstanding for the contribution to these projects is not much as just in the region of about Rs 200 crore, but the major project which we won recently which we have not communicated because we not received the letter, that I will come back to you later when we get the letter. And the third sector, the power sector is the only sector which consumes large amount of capital because close to 5000 MW of capacities are under expansion now. We have capital at least for the next 12 to 18 months time and beyond that we have our plans to raise the capital for this power sector.