GMR Power and Urban Infra Limited - Divestment of stake in non-operating and stressed assets

GMR Power and Urban Infra Limited had earlier announced regarding reaching a settlement ("One-Time Settlement" or "OTS") with the lenders of GMR Rajahmundry Energy Limited ("GREL"), an associate company of GMR Power and Urban Infra Limited ("GPUIL" or "Company").

In furtherance of the efforts being made by the Company and its subsidiaries (the "GMR Group") to reduce debt levels, to strengthen the GMR Group's financial health and also to meet the funding requirements towards the OTS with the lenders of GREL, the Company has been exploring opportunities to divest the GMR Group's non-operating and stressed assets.

In this regard, the Company, GMR Energy Limited ("GEL"), a wholly owned subsidiary of the Company, and GMR Generation Assets Limited ("GGAL"), a subsidiary of the Company, have signed a framework agreement (the "Framework Agreement") with Synergy Investments Holding Limited ("Synergy") for the divestment of their respective stakes in: (a) GMR Bajoli Holi Hydropower Private Limited ("Bajoli Holi"), a company undertaking a 180 MW hydro-electric power project, (b) GMR Vemagiri Power Generation Limited ("Vemagiri"), a company that owns a 388 MW natural gas based combined cycle power plant and (c) GMR Rajahmundry Energy Limited ("GREL"), a company that owns a 768 MW natural gas based combined cycle power plant. Synergy is neither part of the promoter group nor is it a related party to the GMR Group.

In accordance with the Framework Agreement,

(A) GEL will transfer 79.86% of the equity shares of Bajoli Holi in two tranches (i.e., 70% in the first tranche and 9.86% in the second tranche) and the relevant GMR Group entities will transfer 100% of the compulsorily convertible debentures issued by Bajoli Holi, to Synergy;

(B) GEL will transfer 51% of the equity shares of Vemagiri to Synergy; and

(C) GGAL will transfer 51% of the equity shares of GREL to Synergy, upon completion of the proposed OTS.

The GREL and Vemagiri power plants have been non-operational due to non-availability of affordable natural gas to operate the plants.

The consolidated consideration for the transfer of securities pursuant to the transactions contemplated (for all the above 3 entities) under the Framework Agreement is INR 653 crores, subject to net working capital adjustments and other adjustments at the time of closing.

The transaction (either together, in relation to all the above 3 entities, or separately, as and when the relevant conditions precedent related to the respective entity is satisfied and requisite approvals are received) is expected to be consummated on or before September 30, 2025 or such later date as mutually agreed by the parties to the transaction.

This transaction will enable the Company to meet the proposed OTS with the lenders of GREL, delever the balance sheet by ~INR 4400 crores and spin off the non-operational gas plants and stressed assets of the GMR Group. This will further improve the bottom line of the Company.

Synergy is owned by a private equity fund managed by Synergy Capital, a strategic investment manager and advisor with offices in the UAE, Singapore and India. Synergy Capital focuses on the industrial and infrastructure sectors globally. Synergy Capital provides structured and innovative solutions across the capital spectrum, coupled with operational value creation, to help companies transform their businesses and optimize their balance sheets.

The turnover and net worth details of Bajoli Holi, Vemagiri and GREL are enclosed in the annexure hereto.

Mr. Srinivas Bommidala, Managing Director of GPUIL, said: "We had developed the plants with a lot of commitment, however, due to reasons beyond our control and non-availability of affordable gas, the gas plants have been non-operational since 2016. This consolidated divestment will help us to settle our obligations with the lenders of GREL. This transaction gives us the opportunity to spin off the stressed assets from the Group and focus on growing our platform with strong fundamentals. This transaction will help us strengthen the financial position of the company due to reduction of liabilities and is consistent with our "Asset Light Asset Right" strategy."

Mr Sudhir Maheshwari, Founder and Managing Partner of Synergy Capital, said: "Synergy Capital has previously invested in a 165MW natural gas fired power plant in Thailand and has been actively looking for renewable energy investment opportunities in India. We are confident that we will create value for our stakeholders through this acquisition."

Source : Equity Bulls

Keywords

GMRPowerandUrbanInfra OTS GMRRajahmundryEnergy StakeSale NonOperatingAssets StressedAssets