Canadian Investor In Talks To Buy A Large Stake In Debt-Hit Group Flagship
Brookfield Asset Management, one of the world's largest investors in infrastructure and real estate, is in talks to acquire a large stake in the debt-laden GVK Power & Infrastructure for as much as $1 billion, two people familiar with the matter said.
The transaction, which is not yet finalized, involves Brookfield investing $650 million through equity and $350 million in debt. The deal could be a game changer and the first instance of a big global investor snapping up India's troubled infrastructure assets, a major part of the stressed loan portfolio of domestic banks.
The Hyderabad-based G V Krishna Reddy-led infra conglomerate is seeking a white knight to manage debts totalling $3.5 billion and an Australian coal mine acquisition that has gone awry . The listed GVK Power & Infra has a beaten-down market value of $240 million.
The company , in which the GVK family holds 54%, owns non-renewable power plants, toll-road assets and two marquee airports in Bengaluru and Mumbai. It has been working on listing the airports after a demerger.It is not clear whether the discussions with Brookfield cover airports. Post the transaction, Brookfield is expected to emerge as the company's top shareholder, but TOI could not ascertain the structuring details of the potential deal.
A GVK spokesperson said he would not comment on speculative reports. Brookfield, through its external public relations agency , too said that it doesn't comment on market speculation.
Stalled projects, high debt and past projects that have turned commercially unviable now have impacted Indian infrastructure companies, with their total debt touching the highest level in more than a decade. Infrastructure builders such as Jaiprakash Associates and GMR Infrastructure have been restructuring their portfolio to pare debt.
“Infrastructure is a highly capital-consumptive sector.Nobody has infinite capital.Companies have to recycle assets like selling some of their portfolios or introducing investors to deleverage balance sheet and release funds for future growth,“ said Rahul Mody, headinfrastructure, Ambit Corporate Finance.
Canadian investor Brook field, listed in New York and Toronto, manages assets worth over $200 billion across infrastructure and real estate. Its infrastructure unit buys into utilities, energy and transportation assets globally , and has sa ignificant presence in Australian infrastructure where GVK is grappling with its coal mines.
Brookfield has ploughed in over $1.6 billion into Indian real estate and infra assets. This includes the acquisition of IT parks from stressed Indian developer Unitech, an infrastructure fund with Kotak and a real estate fund with the Ashok Piramal Group.
GVK has 2,500 MW of operational and under-development power plants, 1,500 lane kilometres of toll roads and a proposed $10 billion integrated mine, rail and port project in Queensland, Australia.
