GMR Infra to give preferred shares to Temasek, IDFC consortium
GMR Group has offered a small stake to a clutch of private equity investors in its flagship company to compensate for a delay in facilitating their exit in one of GMR’s units.
Singapore’s state-owned investment firm Temasek Holdings Pte Ltd, and a consortium of investors led by Indian private equity (PE) firm IDFC Alternatives have agreed to restructure their investments in GMR Energy Ltd (GEL), confirmed by the Bangalore-based infrastructure company on Friday. It also said that GMR Infrastructure Ltd, the flagship company of GMR Group, will give Rs.788.8 crore worth convertible preferred shares (CCPs) to Temasek and Rs.347.8 crore worth CCPs to the IDFC consortium.
In 2010, a combined investment of Rs.1,395 crore was made by these two companies in CCPs in GMR Energy —Temasek with Rs.930 crore and IDFC consortium Rs.465 crore.
The investors, in turn, subscribed to CCPs in the flagship company GMR Infrastructure by restructuring their earlier agreement with GMR for Rs.1,136.6 crore, which would convert to common shares at a price determined on the basis of norms set by the capital markets regulator. The investors were keen to exit GMR Energy through the initial public offering (IPO), which is being held up because of weak market sentiment.
These investors have agreed to stay invested in GMR Energy over a longer time-span.
GMR Group said in a statement on Friday, “The residual investment of the investors in GMR Energy will continue,” After postponing several times, GMR Group in the second half of current fiscal year had planned to sell GMR Energy shares to the public through an IPO.
The proposed IPO is not likely to hit the market for at least the six months with this latest restructuring of investment in GMR Energy.
The milestones set by these investors and any timeline given to GMR Energy to achieve these milestones could not be ascertained.
At a preset date CCPs have to be converted into ordinary shares. Company’s performance is linked to the time of conversion by Private equity investors.
He observed, “This is one of the rare instances where a company is giving a pound of flesh in its main company to compensate for the losses made by investors in its subsidiary on mutually agreed terms,” said a senior executive from consultancy firm. He requested anonymity. “This may be a small stake (less than 5%) in GMR Infrastructure when they convert into equity 18 months later. But a promoter could have stayed away from not compensating citing economic slowdown.”
On Sunday night a GMR Group spokesperson answered about the conversion price of CCPs,as the conversion of CCPs will not happen now at the current prices, but the actual conversion will take place in 18 months from now at the then prevailing price, as per the guidelines of capital markets regulator’s.
GMR may be forced to do this deal following pressure by high profile investors, who were impatient about the delay was said by a second expert, on requested secrecy. He added “And we don’t know what are the milestones set by these private equity firms. However, this will reflect positively on the company and increase the credibility among investors.”
GMR Group chairman G.M. Rao said, the investment restructuring will pave the way for value creation at GMR Infrastructure and GMR Energy as the group’s power portfolio has almost reached the peak of its capital expenditure cycle and is getting into the operational phase.
Satish Mandhana, managing partner and chief investment officer at IDFC Alternatives said, “GMR Energy has been our fourth investment with the GMR Group in the past 10 years. 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.”
GMR Energy has about a dozen companies under its fold, including GMR Power Corp. Ltd, Vemagiri Power Generation Ltd, EMCO Energy Ltd and GMR Kamalanga Energy Ltd.
Source: Live Mint
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