IVRCL to Sell Gasfield Holdings to Fund Road ProjectsSharang Limaye
IVRCL Ltd., an Indian construction company, plans to sell its stake in five gas exploration blocks and use the proceeds to fund road-building projects.
The company, based in Hyderabad, plans to complete the sale in a “few weeks,” Chairman Sudhir Reddy said in an interview. IVRCL holds 25 percent each in three areas in Yemen and 20 percent each in two blocks in Egypt, through a subsidiary. The balance is held by Gujarat State Petroleum Corp., and two other partners, according to IVRCL’s annual report.
The stake sales will help the company raise funds for road projects as flagging revenue due to regulatory bottlenecks and the highest borrowing costs in Asia prevent them from bidding for new projects. IVRCL in September said it plans to invest 11 billion rupees over three years in four highway projects.
“It has come to a bit of a matured stage, where we thought we should sell out,” Reddy said. “We would like to hang on. But in today’s investment climate, we thought it would be better to exit.”
IVRCL’s shares gained 0.4 percent to 43.55 rupees at 10:51 a.m. in Mumbai. They have dropped 4.4 percent this month.
The company has invested 2 billion rupees in the gas projects. The ventures have discovered the fuel during exploration, “but it is not quantifiable,” Reddy said.
India’s central bank will lower its repurchase rate to 7.75 percent from 8 percent at a Jan. 29 review to spur growth, according to 11 of 14 analysts in a Bloomberg survey. The rate was last lowered by half a percentage point in April. Asia’s third-largest economy may expand as little as 5.7 percent in the year through March, the least in a decade, according to the finance ministry’s estimates.
“We are praying and hoping that interest rates come down soon,” Reddy said. “Until then, we have to survive by selling stakes in our projects. But with all players looking for exits, there are just too many sellers and not enough buyers.”