GMR Infrastructure (GMR) concluded its $250-million qualified institutional placement (QIP) at Rs 31.5 per share along with 180-million preferential warrant allotment to promoters (~$100 million). This ~16.9% dilution will enhance the company’s cash balance by R2,000 crore, which management plans to utilise to prune ~R3,500-crore corporate debt, thereby, reducing consolidated debt: equity to 4.3x from 5.6x in FY15E.
While we revise our target to R39 (R40 earlier) to factor in the dilution, we continue to believe GMR’s strong asset portfolio aid valuations with further upside potential likely from developments in power, Delhi airport land and Male Airport settlement. We maintain a buy rating.
The pricing at R31.5 per share led to ~16.9% dilution (fully diluted capital of 4.45 billion shares). The company will receive 25% of the preferential allotment money now and the balance in next 18 months. Management proposes to utilise the proceeds to reduce R3,500 crore corporate debt which is due for repayment in next 18-24 months.
To reduce corporate debt and pursue growth opportunities, management continues to explore other avenues to raise funds including listing its energy and airport verticals, divesting stake in projects and asset sales over the medium term.
We maintain intrinsic value of the company’s asset portfolio drives our revised target price of ~R39 (R40 earlier). We expect signing of PPAs for its Chattisgarh project, partial land monetisation of the Delhi airport land at revised rates, settlement of Male Airport dues and clarity on gas projects could provide further impetus to the stock valuation.