GVK Power & Infrastructure Ltd., an Indian generator backed by T. Rowe Price Group Inc., plans to raise as much as 15 billion rupees ($326 million) selling a stake in its energy unit to boost generating capacity.
The builder of airports and power plants plans to sell securities that can be converted into equity of its unit, GVK Energy Ltd., Chairman G.V. Krishna Reddy said in an interview in Hyderabad, where the company is based. GVK is in talks with private equity firms for the sale, he said.
GVK joins Asian Genco Pte in seeking private equity funding as investors prepare to tap rising electricity demand in Asia’s second-most populous nation. India, ranked below Ivory Coast and Sri Lanka for the quality of infrastructure, plans to increase generation by 77 percent in the next seven years to reduce blackouts and drive the world’s third-fastest growing major economy.
“Raising the money this time will not be a problem because they are putting the money in the new energy company,” said Ujjal Deb Roy, an analyst at VCK Share & Stock Broking Services Ltd. in Kolkata. Still, the company needs to plan its fund raising because “if it continuously dilutes earnings, investors will not get value out of the project.”
GVK, which has declined 5.7 percent this year, rose 1.4 percent to 43.8 rupees in Mumbai yesterday. The benchmark Sensex Index has advanced 3.9 percent this year. GVK shareholders approved the transfer of the company’s power subsidiaries to GVK Energy, according to a statement to the Bombay Stock Exchange on June 30.
Asian Genco
Morgan Stanley Infrastructure Partners and a group of global investors are investing $425 million in Asian Genco, an infrastructure company with power generation assets in India. The group includes General Atlantic LLC, Goldman Sachs Investment Management, Norwest Venture Partners and Everstone Capital, Asian Genco said. PTC India Ltd., the nation’s biggest power trader, will remain an investor in the various projects.
Larsen & Toubro Ltd., India’s largest engineering company, on April 16 said it plans to create a $300 million private equity fund to invest in power, road projects in India.
Government agencies are also easing rules to attract investors. The Reserve Bank of India on April 20 said lenders won’t need to value bonds, sold by infrastructure companies with a maturity of at least seven years, at market rates.
The central bank also eased provisioning rules for infrastructure projects. India said it plans to double spending on building utilities, roads and ports to $1 trillion in the five years ending 2017.
Infrastructure Spend
India spends 6.5 percent of its gross domestic product on infrastructure, compared with 11 percent in China, according to consulting firm Ernst & Young LLP.
GVK also plans to invest as much as 50 billion rupees ($1.1 billion) to expand Bangalore and Mumbai airports this year as traffic expands, Reddy said.
Nationwide, the number of domestic passengers will grow more than fourfold to 180 million by 2020, according to a ministry of civil aviation forecast. Air travel in India has gained as per capita incomes doubled over the past five years and discount carriers such as SpiceJet Ltd. started operations.
India’s aviation industry has the potential to attract as much as $110 billion in investments by 2020, V.P. Agrawal, chairman of Airports Authority of India, said July 29.
T. Rowe Price owns about 4 percent of GVK, according to data compiled by Bloomberg.
Source: Bloomberg