With most infrastructure companies keen to divest stake in assets to trim debt and reduce equity exposure, it has become a buyers’ market.
L&T, GVK, GMR, IVRCL, NCC, Lanco Infratech and Madhucon have expressed their intention to divest stake in some of their matured build, operate and transfer mode assets.
Several of them, who have diversified portfolios spanning power projects and airports, are considering raising funds for project expansions and seeking to infuse fresh equity to achieve financial closure for new projects.
Interaction with some of the top construction and infrastructure companies reveals there are quite a few sellers and the buyers have plenty of choice.
Buyers are in no hurry to conclude transactions.
This is attributed to dull equity and tough domestic markets and regulatory concerns when it comes to foreign buyers.
Sell-out benefits
The Chairman and Managing Director of IVRCL, E. Sudhir Reddy, admits that the current scenario only shows that the deal making time is longer.
This may mean selling assets at break-even point.
The sell-out helps the company in two ways, the equity component comes down, and the debt gets passed on to the buyer.
Significantly, such deals help them invest in new projects.
The Chief Financial Officer of Madhucon Projects, S. Vaikuntanathan, said investors know that the companies are stretched and bankers are demanding higher equity for new projects awaiting financial closure.
The equity market is dull and investors do not step out to invest.
“Investors also know that most of the companies are keen to divest stake.
“They have options. Equity investments tend to flow when the capital markets are buoyant,” Vaikuntanathan said.
With infra sector valuations at a low, the capital market option is not there. Companies are, therefore, looking beyond BOT projects, he explained.
The Government needs to address issues directly confronting the sector to encourage fund flow, T. Adi Babu, Chief Operating Officer of Lanco Infratech, said.