BANGALORE: GMR Infrastructure said on Monday that it has received unsolicited offers from international investors for buying its 50% stake in overseas power firm InterGen. “We have received unsolicited offers from international investors. If they make value proposition, we will look at it,” A Subbarao, CFO, GMR Group.
InterGen owns power stations in the UK and was acquired by GMR in 2008 for over a $1.1billion. Mr Subbarao’s comments are the first public response from the company to market speculation that the company is looking to offload its stake in the firm.

People close to GMR said that the offers have come from international private equity firms. Mr Subbarao added that the firm is examining the proposal and there are issues of pricing and the amount of stake the company would like to offload. An industry expert in the private equity business told that GMR is likely to sell its stake to another power operator.

The Bangalore-based firm had to take on a fair amount of debt to acquire InterGen. A few days ago, it managed to refinance the loan, though at a higher rate. Analysts tracking the firm have said that GMR’s debt burden will increase substantially after March 2011 when the accounts of InterGen will have to consolidated as per new accounting rules. The burden, according to analysts and company officials, is likely to swell to over Rs 20,000 crore from just over Rs 2,000 crore now. This has forced the company to consider other options such as a stake sale.

InterGen supplies electricity to nearly 2.5 million UK homes. Ontario Teachers Pension Plan owns another 50% in the company. UK newspaper Sunday Times reported on Sunday that Bank of America Merrill Lynch has been appointed to find a buyer. On Monday, GMR reported a net profit jump of 26.23% to Rs 28.4 crore for the quarter ended June due to strong performance from the airport and road businesses. Net sales for the first quarter however inched up a mere 4.6% to Rs 1,231.34 crore as a key power plant was was shifted and relocated. Revenue from the airport business grew 32.34% to Rs 425.1 crore while the power business suffered a 7% fall to Rs 583.8 crore. The EPC business’s revenue fell by 17.7% to Rs 124 crore.

GMR operates Delhi and Hyderabad airports and runs a slew of power projects across India. The company also has three road projects across Hyderabad, Chennai and Karnataka under various phases of development.

“Airports have seen an increase in footfall and continue to perform well for the company. We have also recorded 80% plant load factor (PLF) at both the Chennai and Vemagiri power projects,” said A Subbarao, CFO, GMR Group.

Brokerage firm Anand Rathi said that the firm’s earnings before interest, tax and depreciation was 17% higher than their estimates and that GMR continues to generate Rs 200 crore of cash every quarter.

“GMR has deployed huge capital in building large projects which are in various construction phases and yet to stabilise. We will see an upside in its power business as projects get operational and start generating revenue,” said a senior analyst from KPMG.

In the power vertical, the company plans to raise Rs 5,000 crore of debt which would help it achieve financial closure of the Chattisgarh and Madhya Pradesh power projects as well as contribute to the expansion of the Vemagiri project. The energy and airport vertical contributes 43% and 41% to the company’s revenues, followed by roads at 7% and EPC at 9%.