PE investors trade in GMR Energy shares for infra exposure

GMRI is a flagship company of industrial conglomerate GMR Group and parent of GMRE.

It will issue INR7.9 billion and INR3.5 billion in shares to the Singapore sovereign wealth fund and the IDFC consortium, respectively, via a preferential allotment, as per a regulatory disclosure.

Both parties had previously invested INR13.9 billion in convertible preference shares in GMRE in 2010. While the bulk of these holdings will be swapped for shares in GMRI, the investors will retain a residual invesmtent worth INR2.58 billion in GMRE.

The transaction means the company can avoid buying back the compulsory convertible preference shares.

In September, the investors dropped the option of exercising the put option and started negotiations with GMR. Management agreed to offer preference shares in GMRI because the company was not in a position to buy back the shares, given its debt burden of INR410 billion and 3.7x gearing.

The deals also comes as GMR is looking to spin-out the energy business via an IPO. GMRE has about a dozen subsidiaries, including GMR Power Corp, Vemagiri Power Generation, EMCO Energy and GMR Kamalanga Energy.

"GMR Energy has been our fourth investment with the GMR Group in the past 10 years," said Satish Mandhana, managing partner and CIO at IDFC.

"This step is a clear demonstration of how the investors and GMR worked together to forge a win-win solution by being considerate of partnership obligations, in a very difficult and challenging external environment for the power sector. We look forward to a successful IPO of GMRE in near future"

Last week, GMR completed the sale of its 74% stake in GMR Ulundurpet Expressways (GUE) to IDFC's India Infrastructure Fund (IIF) for INR2.22 billion. GMR Ulundurpet Expressways operates a stretch of about 73 kilometers from Tindivanam to Ulundurpet on National Highway 45 in Tamil Nadu. The project went into commercial operation in July 2009.

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• Topics
• South Asia
• Infrastructure
• India
• Infrastructure
• IDFC Private Equity
• Temasek Holdings