GMR Highways, part of the Bangalore-based GMR Group, has sold a majority stake of 74% in its Tamil Nadu toll road asset —GMR Ulundurpet Expressways (GUEL) — for around R222 crore to IDFC Alternatives’ India Infrastructure Fund 1 (IIF1).
IDFC Alternatives is the alternate asset management vertical at IDFC. GUEL operates the highway stretch of 73 km from Tindivanam to Ulundurpet on National Highway 45 in Tamil Nadu. The project commenced commercial operations in July 2009.
GUEL, along with three other road assets of the company, was on the block for the last six months, and GMR was understood to have been engaged with a host of Indian and foreign investors for the stake sale.
The other three assets up for sale are understood to be an annuity project Adloor Yella-Reddy-Gundla Pochanpalli in Andhra Pradesh, and BOT toll assets of Hyderabad-Vijaywada and Hungund-Hospet.
According to market sources, SBI Macquarie and Morgan Stanley had also looked at these assets for a possible stake purchase. At present, sources say IDFC is in discussions with GMR for other road assets as well. However, IDFC Alternatives managing partner and CEO MK Sinha did not comment on the same.
While GMR and IDFC refused to comment on the valuations for GUEL, market sources say the company would have received about 5% premium on the book value. The originally R800-crore Ulundurpet project saw a cost escalation of about R90 crore during construction, taking the project cost close to R890 crore, say sources.
GMR’s equity investment in the project is close to R291 crore, and the project has a term loan of about R596 crore, the source said. “The toll collected on the project is about R203 crore in the 2011-2012 fiscal,” he said.
GUEL is the second divestment in GMR’s roads portfolio. In February, GMR Highways divested 74% stake in Farukhnagar-Jadcherla highway in Andhra Pradesh to SBI Macquarie Infrastructure Investments and SBI Macquarie Infrastructure Trust for R206 crore.
GMR Group CFO Madhu Terdal said the divestment was in line with GMR Group’s ‘Asset Right and Asset Light Strategy’ and will reduce debt by about R459 crore as on August 31, 2013, on a fully consolidated basis.
Sinha of IDFC Alternatives said, “This investment is our first major acquisition and a step in the direction of implementing our road sector strategy. Given the uncertainty and delays in implementing under construction projects, we will continue our focus on acquisition of