GVK Power and Infrastructure Ltd (GVKPIL), witnessed volatile trade on Monday, with the scrip going up in the morning trade and later slipping as the news of stake sale to part fund Hancock Coal mine deal buy was making rounds.
The GVK scrip was up by about seven per cent in the morning trade today at BSE to hit a high of Rs 18.20.
The news of the company arm buying coal mining assets and related infrastructure including rail line lifted the stock up for possibly one of the major catches by an Indian company down under from the Australian mining company for $1.26 billion.
However, during the course of the day, when the proposal of the GVK management to download some stake in the company to part fund the mine buy and its business plan down the line came through, the company scrip closed the day's trade lower at Rs 16.90 , down 0.59 per cent from previous day's close of Rs 17.05.
The management of the diversified GVK group, which is into power projects, roads, airport development and other infrastructure, has thrown hints at possible dilution of equity stake in the power business to raise up to $1 billion to facilitate investments in the mining venture in Australia.
On Friday, the GVK group had announced the acquisition of major stake in the mining assets of Hancock, which includes the Alpha and Alpha Coal West projects for about $1.26 billion, but also hinted that the mines along with related infrastructure could potentially need up to $10 billion to harness its full potential.
However, the management would require another billion dollars to step up coal production and develop some related infrastructure from these mining assets in the initial phase.
Key factor
“Apart from execution challenges, financing of this large deal is key — GVKPIL will have to invest Rs 600 crore over the next 15 months on its part, putting pressure on an already leveraged balance sheet,” said a report from Goldman Sachs, which maintained neutral rating on the stock.
Indian power companies have been pursuing coal assets in Australia and other South East Asian countries including Indonesia to secure themselves and their thermal assets from the uncertain coal supplies for power projects back home. Consequently, Jindal, GMR, Lanco Infratech and now GVK have all made strategic investments in coal mines.