Ramky Infrastructure in talks to sell road assets to raise Rs 900 crore
Ramky Infrastructure, the Hyderabad-based infrastructure company is in negotiations with private equity fund Morgan Stanley Infrastructure Partners and the Ajay Piramal group to sell three of its road assets to raise funds and cut debts. The company has plans to raise Rs 900 crore from the sale of assets. These assets that company wants to dispose of include Ramky Elsamex, Sehore Kosmi Tollways and NAM Expressway. Ramky has appointed ICICI Securities as the investment banker for the transaction.
Giving details regarding the transaction, a person with direct knowledge of the deal says, “Ramky Infrastructure is at an advanced stage of discussions with the investors for selling three road assets. The due diligence process has already started and the company expects to conclude the deal with the investors over the next couple of months. IL&FS has agreed to sell its 50 per cent stake in NAM Expressway.” Alternatives like IDFC have also been approached. Recently, the due diligence of the NAM Expressway project in Hyderabad Potential was undertaken for due diligence by the investors.
It is believed that Ramky Infrastructure will use the money to retire its consolidated debt of Rs 2,100 crore. The person quoted above, giving further details said, “The company plans to use the equity amount of Rs 900 crore to clear most of the standalone debt. In all, the sale of three road assets will help the company to retire debt of around Rs 2,100 crore on the consolidated balance sheet level.”
The company’s assets, which are up for sale, have already started generating revenues. Ramky Elsamex, located in Hyderabad, has reported Rs 63.09 crore of annuity income but incurred a net loss of Rs 4.14 crore during the year to March 2013. Sehore Kosmi Tollways is located in Madhya Pradesh, while NAM Expressway has its project in Andhra Pradesh, on the Narketpalli-Addanki-Medaramitla route. The India’s Infrastructure sector having been plagued by the policy paralysis currently may make it difficult for Ramky to attract buyers due to decreased investment appetite and valuations for road assets, said the analysts.
The Fitch group’s Indian subsidiary, India Ratings, has given a negative outlook for the Indian toll road sector in its report dated February 13. Talking on this, analysts Venkataraman Rajaraman, Sriram Parthasarathy and Chintan Lakhani said, “This is because of the underperforming individual road assets, sluggish macroeconomic indicators, policy-related issues, lack of investment appetite in the sector and poor valuations.”
India Ratings concluded in its report that many factors like: the easing of exit norms by the government, stressed liquidity profile of sponsors and the underperformance of toll roads were creating problems for the investors and investors and were forcing them to consider a full or partial divestment in stakes or seek external capital into these projects to set right disparities in cash flows.
Adding further to this, the analysts stressed, “However, due to mismatches in valuation expectations between potential investors and sponsors, the process is likely to be prolonged. While potential investors are likely to consider this as a distress sale, sponsors’ expectation to recover maximum value out of these assets is evident.”
Source: The Economic Times
Ajay Piramal Group, Andhra Pradesh, Chintan Lakhani, Fitch, Hyderabad, India Ratings, infrastructure company, Morgan Stanley Infrastructure Partners, NAM Expressway, policy paralysis, Ramky Elsamex, Ramky Infrastructure, Sehore Kosmi Tollways, Sriram Parthasarathy, Venkataraman Rajaraman
