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Lanco Infratech to sell Australian coal and Indian road assets |
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HYDERABAD: Cash-strapped infrastructure major Lanco Infratech plans to sell its Australian coal and Indian road assets to pare debt as well as make equity investments in domestic power projects, a top executive said.
Lanco, which raised Rs 6,650 crore after selling a couple of power projects to Greenko and Adani and plans to sell more power stations worth Rs 20,000 crore, however, plans to infuse funds to improve valuations of the coal and road assets before putting them on the block, said L Madhusudhan Rao, group executive chairman at Lanco.
This is the first time that a Lanco official has gone on record on plans to sell its Australian coal asset, Griffin Coal. The company will also sell its two operational road projects in Karnataka, where it invested around Rs 600 crore.
"We will be selling road assets as well, but we want to wait for overall sentiment and GDP outlook to improve on traffic growth estimates," Rao said. The two road projects together collected Rs 59 crore of toll revenues last fiscal.
Based in Collie, south east of Perth, Griffin is the largest individual supplier of coal to Western Australia's industrial market with resources of around 1.1 billion tonne. Lanco had bought Griffin Coal for A$730 million, or about Rs 3,400 crore, in March 2011 from the Australian businessmen Rick Stowe, who sought bankruptcy protection and appointed managers to sell assets.
"Griffin does not fit into my strategic plans today," Rao told ET. "Today, I am finding that setting up imported coalfired power project is highly risky unless it is under regulated tariff structure, which no more exists in this country. Now it is all competitive bidding. I have doubts on sustainability of power projects on imported coal under competitive bidding route," he said.
At the time of acquiring Griffin Coal, the Lanco management said it hoped to meet at least 30% of its total coal requirement of around 50 million tonne through the Australian acquisition by 2015. Lanco, which managed to produce 2.83 million tonne of coal from Griffin during the fiscal to March 2014, hopes to increase its output to around 5 million tonne by the end of this fiscal.
It had plans to ramp up capacity to 15 million tonne a year in phases by investing around $1 billion. Lanco recently obtained environmental clearances for developing a new berth at Bunbury port for export of coal from Griffin.
Other top Indian power producers such as Adani, JSW, Essar, Reliance, Tata and GVK, too, have secured overseas coal resources to feed power units in the domestic market.
But, apparently, Lanco no longer consider overseas coal mine as a strategic fit for expanding its portfolio of power assets in the domestic market. "Griffin is an asset for someone who is into commercial mining and selling coal," Rao said. "Griffin is a good asset in a good country where processes are well defined." An infrastructure analyst with a Mumbai-based brokerage tracking Lanco Infratech, however, said, "Improvement in valuation for Griffin Coal is feasible only if Lanco invests in ramping up production capacities and ensures higher realisations, which is likely only when the overall global coal market recovers."
The group executive chairman said Lanco could not invest adequately in Griffin at the speed required given the financial constraints it suffered over the last couple of years.
"We couldn't sink in dollars that we need to set right things. Our approach now is to ensure that we make this asset ready in terms of showing its value so that there is interest from the strategic partners," he said.
Lanco hopes to keep Griffin Coal ready for sale by December 2015. Refusing to divulge expected valuations, Rao said, "The valuations will depend on the market conditions. If the market improves, I may get premium. In my opinion, Griffin has got a very strong intrinsic value."
After selling coal and road assets, Rao said the infrastructure firm plans to confine to power generation and select EPC business "where we have experience and bandwidth". Lanco, which has some Rs 48,000 crore of consolidated debt on its books including non-fund support from lenders, hopes to shed at least Rs 15,000 crore of debt by selling some 3,000 MW of power assets in the next few months.
Source : economictimes.indiatimes.com
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