GMR Infra is looking to raise Rs 1136.4 crore through preferential allotment (CCPS) to Temasek and IDFC Alternatives. However, we do not see any short-term benefit from the deal and thus, advise the investor to stay away from the stock till the company shows signs of a turnaround.
GMR Infra has given clarity regarding its CCPS (Compulsory Convertible Preferential Share) preferential allotment to Temasek (Singapore-based investment company) and IDFC Alternatives (private equity firm). GMR Infra is raising Rs 1136.4 crore through CCPS, which would be converted into equity share after 17-18 months, based on the price to be determined as per SEBI ICDR (Issue of Capital and Disclosure Requirement) 2009 rules. The company is currently raising fund for the operational phase of GMR Energy as it has already completed funding of its capital expenditure.
Temasek and IDFC Alternatives had invested Rs 1350 crore through CCPS in 2010 and have again shown faith in GMR Infra. Temasek will invest Rs 788.8 crore, while IDFC Alternative is investing Rs 347.8 crore.
GMR Infra is into the development of various infrastructure projects through its subsidiaries. It operates in four business segments, namely energy, airports, highways, and urban infrastructure. In the energy business it currently has 15 power generation assets of which 8 are operational and 7 are at various stages of development.
GMR infra has a loan burden of Rs 31633.5 crore (as per it annual report March 31, 2013) with negative interest coverage ratio. Due to huge interest cost, it is recording losses from the last three consecutive quarters. At present, it has Rs 390 crore of outstanding equity shares which are trading at Rs 20.35 each and after 18 months (after conversion of its CCPS) its equity share will be increased to Rs 447 crore.
The current economic condition is not favourable for the company as monetary policy is already tighter and infrastructure industry is not showing reasonable growth. We don’t see short-term benefit after the deal because the company’s energy unit (21% of total revenue) is at a developing stage, while airports (55% of total revenue) and highways segments are showing a marginal increase of 0.4 % YoY in its revenue. Thus, we advise the investor to stay away from the stock until the company shows signs of a turnaround.