KIA makes largest direct investment in India

The Kuwaiti sovereign has bought $300m worth of bonds issued by GMR as the developer also prepares to divest its airport and energy businesses.

Bangalore-headquartered GMR Infrastructure (GMR) has raised $300 million from the Kuwait Investment Authority (KIA) by selling 60-year foreign currency convertible bonds (FCCBs).

GMR said the bond can be converted into shares 18 months from the issue date of 4 December. The bonds, which will be due for redemption in 2075, carry a coupon rate of 7.5 percent.

The initial conversion price will be INR18 (€0.25; $0.27) per share, which represents a premium of about 30 percent to GMR’s three-month average share price. 

On full conversion, KIA will own more than 15 percent in GMR. The stake of other investors in the business will be diluted. 

The FCCB issuance's proceeds will primarily be used to repay debt held by GMR and its subsidiaries. GMR's consolidated debt load stood at INR434.39 billion as of September this year.

“This is the largest bilateral investment of KIA in India. The investment shows confidence of sovereign investors in the long-term policies being implemented by the government, particularly in the infrastructure space,” G.M. Rao, GMR’s chairman, said in a statement.

Farouq Bastaki, KIA’s executive director, said KIA believes GMR is well positioned to play an important role in India as the country aggressively expands its infrastructure asset base in the coming years. 

Deutsche Equities India acted as financial advisor to GMR, while Citigroup Global Markets India advised KIA.  

With interests spanning most infrastructure sectors, GMR is reportedly looking to sell its stakes in airport and energy businesses to further pay down debt. 

Canada’s Fairfax Financial Holdings, Singapore’s Changi Airports International and US-based KKR and Apollo Global Management are understood to be in talks with GMR to buy about 30 percent stake of its airport unit. 

GMR owns 54 percent of Delhi International Airport, 63 percent of GMR Hyderabad International Airport and 40 percent of the Mactan-Cebu International Airport modernisation project in the Philippines. 

The company is also seeking investments from strategic players in its energy holding company and power projects. These would be undertaken through a special purpose vehicle.