Brookfield buys 9 Gammon Infra projects for Rs6,750 cr

Brookfield Asset Management on Friday announced the acquisition of nine infrastructure projects in India, including six road and three power projects, from Gammon Infrastructure Projects Limited, for around Rs6,750 crore, in the biggest one-day asset sale by an Indian company.

The deal, involving Gammon Infrastructure Projects Ltd (GIPL), a step-down subsidiary of Gammon Infrastructure and a consortium of Canada's Brookfield and Core Infra India Fund, will fetch a net Rs563 crore for Gammon Infra while also reducing its debt by Rs1,718 crore, the company said in a release.

The transaction comes within days of government allowing highways developers to divest 100 per cent equity in projects two years after the completion in order to unlock capital and make additional funds available for investment in projects.

"GIPL, a leading Indian infrastructure project developer, today signed a share purchase agreement divesting nine of its project companies to the consortium comprising funds managed by Brookfield Asset Management and its affiliates (Brookfield) and Core Infrastructure India Fund Pte Ltd (CIIF) under the name BIF India Holdings Pte Ltd," the company said in a statement.

"Aggregate cash inflows for GIPL on the account of divestment would be approx Rs563 crore subject to closing adjustments and an additional cash inflow of up to Rs 100 crore may be realised by GIPL upon crystallisation of certain milestones in future," it said.

Out of the nine projects, six are operational, one is under expansion and two are under development.

Projects divested by GIPL include Sikkim Hydro Power Venture Ltd, Andhra Expressway Ltd, Rajahmundry Expressway Ltd, Kosi Bridge Infrastructure Ltd and Gorakhpur Infrastructure Co Ltd.

Gammon infrastructure has also divested its stake in Mumbai Nashik Expressway Ltd. The company held approximately 80 per cent stake in the firm.

Among key terms of transaction, the company said the consideration towards equity comprises cash consideration of approximately Rs192 crore and an advance waiver of Rs285 crore.

These projects SPV being taken over will repay the inter-corporate deposit of approximately Rs371 crore given by the parent to the SPVs.

The GIPL board also recommended divestment of 50 per cent shareholding of Vizag Seaport Private Ltd for a consideration of Rs62.5 crore in favour of Latin Infrastructure Projects Ltd, an affiliate of an existing shareholder, Lastin Group.

"The total project cost at completion of the asset basket is estimated to be approx Rs 6,750 crore (Rs2,935 crore of six operational projects and Rs3,815 crore for remaining three projects) of which Rs3,097 crore has been capitalised till March 31, 2015. The outstanding debt as at March 31, 2015 for these projects is Rs1,718 crore and the net exposure of GIPL in the asset basket is Rs415 crore," the company said.

"Post the transaction the consolidated debt of GIPL will stand reduced from Rs3,947 crore to Rs2,229 crore which is expected to improve the gearing of Company at consolidated level from more than 4x to around 2x going forward and make GIPL net cash surplus."

The company said the positive policy changes in the infrastructure space by the government in general and Road Transport and Highways Ministry in particular has resulted in the revival of interest of marquee overseas investors such as Brookfield in the Indian infrastructure sector.

"The transaction involving nine projects represents the largest asset sale at one go in the Indian infrastructure industry. This is reflective of the improved sentiments being demonstrated by foreign investors due to positive approach of the government in the infrastructure space," Abhijit Rajan, CMD, Gammon Group, said.

"This transaction represents Brookfield's first major investment in Indian infrastructure and provides us a great platform to participate in the Indian growth story," Anuj Ranjan, managing partner, Brookfield, added.

"This transaction allows GIPL to get the much needed capital released from its completed projects and improve its financial position to capture the new opportunities in infrastructure space arising out of governments new initiatives,'' Kishor Kumar Mohanty, MD, GIPL, said.

"This is a win-win proposition for both Gammon Infrastructure and Brookfield and new path breaking direction for the infrastructure industry," he added.

Brookfield is a leading global alternative asset manager with over $200 billion in assets under management, focusing on infrastructure, renewable energy, private equity and property.

CIIF is an India focused infrastructure fund managed by the Singapore branch of Kotak Mahindra (UK) Ltd.

Earlier this week the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has permitted 100 per cent equity divestment after two years of construction/completion for all BOT projects, irrespective of year of award.

This will allow infrastructure developers to use proceeds from the sale of divested equity in incomplete projects to retire their debt to financial institutions in any other infrastructure projects.