Macquarie-SBI Infra Fund to buy 74% in GMR’s highway project

Macquarie-SBI Infrastructure Fund (MSIF) is buying 74 per cent stake in a toll road project in Andhra Pradesh for Rs 206 crore ($38.11 million) from infrastructure major GMR. The fund will buy the stake from GMR Highways in GMR Jadcherla Expressways Ltd (GJEL), which commenced operations in February 2009.

MSIF will immediately pay Rs 195 crore and another Rs 11 crore on completion of certain conditions. GMR said in a statement that the original investment for the 74 per cent stake was Rs 146 crore.

The transaction will be one of the rare control transactions in the infrastructure sector.

GJEL operates the Farukhnagar-Jadcherla highway in Andhra under a concession agreement signed by NHAI. The 232 km stretch between Thondapalli and Jadcherla on NH7 has a concession period of 20 years including a construction period of two-and-a-half years.

According to GMR’s annual report, GJEL reported FY12 revenues of Rs 59 crore with profit after tax of Rs 6.41 crore. The report said GMR Highways had 99.9 per cent stake in GJEL. The infrastructure firm said the deal was in pursuit of its “asset right and asset light strategy.”

Kotak Investment Banking was the exclusive financial advisor to GMR Highways for the transaction. Shares of GMR Infrastructure closed at Rs 18.05, down by 0.55 per cent.

“Globally large infrastructure groups follow the strategy of churning the mature infra assets to optimise the value realisation process and to meet their growth capital requirements. After a phase of rapid growth in diversified infra asset portfolio, we at the GMR Group, are now consolidating our assets as projects get operationalised,” said Subba Rao Amarthaluru, group CFO of GMR.

For MSIF, the deal comes after it invested $150 million last year in the portfolio of seven large-sized roads and highways projects, held by Ashoka Concessions.

Talking about majority stake deals, SBI Macquarie Infrastructure Management CEO Suresh Goyal said in an earlier interview, “There are several opportunities being discussed in the market generally. While these are of interest to us, we continue to pursue minority stake investments, consistent with our investment strategy. Majority stake deals tend to be smaller in size and, therefore, are attractive if they are scalable in some way.”

(Edited by Sanghamitra Mandal)