As a result, the Bangalore-based infrastructure-giant-in-the-making may settle for a far smaller fund mop-up than the originally planned $1 billion.
Investment bankers told DNA Money the response to roadshows has beenlukewarm because investors want a pricing of around Rs 125-130, whereas the company is seeking Rs 160. But A Subba Rao, chief financial officer of GMR, contested the claim, saying response to roadshows was "excellent". He, however, did not reveal how much money has been committed so far by investors. On reducing the size of the QIP, Subba Rao said, "The board took shareholders' approval for $1 billion as an enabling provision and the plan is to raise the remaining funds sometime in future. If we can raise the originally targeted amount (of $500 million), that would be as per our plan." The roadshows drew far less commitments as investors saw "some holes in the company's revenue projections", said an investment banker, asking not to be named. GMR Infrastructure sought shareholder approval to raise about Rs 5,000 crore to fund future projects and keep itself ready for the infrastructure opportunities expected in the road and power sectors. The company has been making presentations to investors in India and abroad for the placement, which would result in an equity dilution of around 10-11%. But the improvement in stock market sentiment globally has meant that QIP issues feel pricey, said the banker. According to the Securities and Exchange Board of India formula for pricing QIPs, the price at which GMR shares will have to be sold will come to Rs 158-160, taking the 2-week or 26-week average, whichever is higher. However, the banker said given the revenue projections of the company, "that price does not look attractive". But Subba Rao said the company has no control over pricing. "We can't do anything about it. It is as per the formula laid down. We are not fixing a higher price." A mutual fund manager, preferring anonymity, said mutual fund shareholding in the company is also insignificant. "The valuation is too futuristic. Infrastructure projects have long gestation periods and current realisations are minuscule. The company is overleveraged at this point and the stock price and market capitalisation of Rs 30,000 crore are too futuristic. Fair value of the share is closer to Rs 120 levels," he said. A senior official with Mumbai-based investment bank concurs, pointing out that since many of GMR's projects are in the initial stages, cash flows will be limited. "They will need a lot of money. They have plans laid out. The infrastructure space is largely immune from worldwide trouble as it is domestic-focused. Such companies are the toast of international investors. They are ready to pump money into such stories in India. But prices have run up sharply in the past couple of months and that could be an issue," the banker said. Another Mumbai-based merchant banker, also wishing anonymity, however, is more optimistic. "GMR is a company with real potential, the realisations will start sometime next year, so they should be fine. There are still many investors looking to enter the space," he said. http://www.dnaindia.com/money/report_pricing-cloud-over-gmr-infra-s-qip_1264948 --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
