Saturday, May 30, 2015

Lanco Infratech - Puts hold to Divestment.

Loss-making Lanco Infratech, which has been in the market to sell assets across businesses to reduce debt, has decided to put on hold all divestment plans in India by another two years on hopes of better valuation as it believes the business environment is improving. 

The company has been on the lookout for investors for its roads and power projects and has also been in talks for selling its land bank to raise funds to pare debt. But now, it sees signs of recovery in the economy and hopes that valuations of these assets will improve by 2017, when it can consider divestment. 

"We were looking for divestment opportunities but now we don't want to sell any Indian asset for another two years. We feel that problems in power sector are getting resolved and there would be a pick-up in road toll collection and this will improve valuations of our projects," Chief Operating Officer T Adi Babu, told ET. 

The company will go ahead with its plans to sell stake in its Australian coal asset Griffin. "We are in talks with a strategic partner and would like to sell not more than one-third of our stake. Coal prices have fallen almost 40-50% from their peak levels, so we don't want to divest more at these valuations," he said. 

Lanco has been reeling under huge debts, mounting losses as its power projects were running below full capacity due to lack of fuel, it has huge outstandings with state-owned discoms, and in its road projects too, the company had seen muted toll collection. 

Last month, Lanco Infratech completed the sale of its biggest power plant, Udupi Power Plant, to Adani PowerBSE 0.65 % in a deal which pegs the enterprise value of the Udupi Power plant at Rs 6,300 crore, making it the biggest in the power sector. With the sale of this projects, the company's debt stands at Rs 34,000 crore. 

"We now have gas available to run one unit of our Kondapalli power plant. We are focusing on getting all power projects on stream over the next two years so that we could go for an initial public offer for our power holding company," Adi Babu said. 

Lanco Infratech is one of the companies that have secured gas supply for its stranded 1,108-mw Kondapalli plant under the government's initiative to make cheap imported R-LNG available to gas-based projects so that they can at least run at 35% capacity. 

Adi Babu said that the company hopes to complete the stake sale in Griffin soon so that it has enough liquidity to take forward its plans for the mines. 

In 2011, Lanco Infra acquired the Griffin Coal in Collie, West Australia, for Aus $750 million. Although the mine's operations and financials were in poor shape, Lanco believed that with an investment of Aus $1 billion, it could turn around the business and expand production from the mine which has reserves of 1.1 billion tonnes. 


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