The reason for the rights issue is to lower the company's high corporate date by Rs 1250 crore. GMR has a debt of Rs 37000 crore that it looks to cut by Rs 1300 crore post the rights issue in November.
GMR Infra will be raising Rs 1500 crore via a rights issue and private equity firm KKR will be lending about Rs 1000 crore at the holding company level to facilitate it. However, KKR will have no holding in either GMR Infra or GMR Holding, says Madhu Terdal, group chief financial officer, GMR Infra.
Speaking to CNBC-TV18, Terdal says the loan is just a long-term structural arrangement being done by the company and KKR will not hold any board seat in GMR Holdings.
The reason for the rights issue is to lower the company's high corporate debt by Rs 1250 crore. GMR has a debt of Rs 37000 crore that it looks to cut by Rs 1300 crore post the rights issue in November.
Below is the verbatim transcript of Madhu Terdal's interview to CNBC-TV18's Latha Venkatesh and Sonia Shenoy
Latha: What will be the debt position now at the end of September 30 itself and definitely by the end of the year?
A: The current debt position is around Rs 37000 crore and post rights issue which is expected to happen sometime in November, I think this should fall down by around Rs 1300 crore again further.
Apart from the actual aggregate amount, what is the miracle that is going to happen actually, if you look at our balance sheet as on March 31, our debt to equity was 1:3.7. Post qualified institutional placement (QIP) it fell down to 1: 3.3 and now of course subject to Sebi approval and the successful completion, this will fall down to as low as 2.70. So in a span of less than six months or even eight months, the debt to equity will be falling down from 1:3.7 to 1:2.70; so that will be the real benefit that this both rights and QIP are going to cost to the company.
Number two, out of the QIP proceeds we had already reduced our corporate debt by about Rs 300 crore and now we are using another Rs 1250 towards reducing the debt. This will bring down the corporate debt in a span of six months by as much as around Rs 1500 crore, that will save the company as much about Rs 200 crore per annum. That will give a big relief to the company and the corporate debt will come down very substantially. If you see all the investors, analysts, this is a cause of concern and GMR has taken effective steps to reduce it.
GMR Infra stock price
On September 18, 2014, at 11:09 hrs GMR Infrastructure was quoting at Rs 23.25, up Rs 0.95, or 4.26 percent. The 52-week high of the share was Rs 38.30 and the 52-week low was Rs 18.50.
The company's trailing 12-month (TTM) EPS was at Rs 0.21 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 110.71. The latest book value of the company is Rs 16.76 per share. At current value, the price-to-book value of the company is 1.39.
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