HYDERABAD/MUMBAI: Hyderabad-based infrastructure company Ramky InfrastructureBSE 4.89 % is in negotiations with private equity fund Morgan Stanley Infrastructure Partners and structured investment group of the Ajay Piramal group to sell three of its road assets to raise funds and cut debts. The company plans to raise Rs 900 crore from the sale of assets. These assets include Ramky Elsamex, Sehore Kosmi Tollways and NAM Expressway. The infrastructure company has appointed ICICIBSE 0.13 % Securities as the investment banker for the transaction.
"Ramky Infrastructure is at an advanced stage of discussions with the investors for selling three road assets. The due diligence process has already started and the company expects to conclude the deal with the investors over the next couple of months. IL&FS has agreed to sell its 50 per cent stake in NAM Expressway," said a person with direct knowledge of the deal. Other infrastructure sector investors such as IDFCBSE 0.74 % Alternatives have also been approached. Potential investors have recently undertaken due diligence of the NAM Expressway project in Hyderabad.
While Ramky Infra and Ajay Piramal group declined to comment, ICICI Securities and Morgan Stanley were unavailable for comments. Ramky Infrastructure will use the money to retire its consolidated debt of Rs 2,100 crore. "The company plans to use the equity amount of Rs 900 crore to clear most of the standalone debt. In all, the sale of three road assets will help the company to retire debt of around Rs 2,100 crore on the consolidated balance sheet level," said the person quoted above.
Ramky's assets, which are up for sale, have already started generating revenues. Ramky Elsamex, located in Hyderabad, has reported Rs 63.09 crore of annuity income but incurred a net loss of Rs 4.14 crore during the year to March 2013. Sehore Kosmi Tollways is located in Madhya Pradesh, while NAM Expressway has its project in Andhra Pradesh, on the Narketpalli-Addanki-Medaramitla route. Ramky may find it hard to get buyers as investment appetite and valuations for road assets have fallen as India's infrastructure sector is still plagued by policy paralysis, analysts said.
India Ratings, a Fitch group entity, announced a negative outlook for the Indian toll road sector in a report dated February 13. "This is because of the underperforming individual road assets, sluggish macroeconomic indicators, policy-related issues, lack of investment appetite in the sector and poor valuations," said analysts Venkataraman Rajaraman, Sriram Parthasarathy and Chintan Lakhani.
India Ratings concluded that the easing of exit norms by the government, stressed liquidity profile of sponsors and the underperformance of toll roads were forcing the sponsors to consider a full or partial divestment in stakes or seek external capital into these projects to set right disparities in cash flows.
"However, due to mismatches in valuation expectations between potential investors and sponsors, the process is likely to be prolonged. While potential investors are likely to consider this as a distress sale, sponsors' expectation to recover maximum value out of these assets is evident."