GVK

After GVK Power and Infrastructure announced on 16 September that it would pay $ 1.26 billion for a majority stake in three coal mines and a port and rail project owned by Australia's Hancock Group, the company's stock surged over 6 percent on the bourses.The deal is one of the largest acquisitions made by an Indian infrastructure company.The Indian infrastructure group will acquire a 79 percent stake in the Alpha and Alpha West coal mines in the Galilee Basin, and will buy Kevin’s Corner coal mine and the rail and port project connecting the coal mines outright, it said in a statement late on Friday.[caption id="attachment_86781" align="alignleft" width="380" caption="GVK was to form an overseas special purpose vehicle  in Singapore for the Hancock dea. Reuters"][/caption]The first phase of production, scheduled to start in 2014, is expected bring in more than 30 million tonnes per year of thermal coal, it said. GVK will pay $500 million initially to Hancock, $200 million after one year, and the remainder on financial close of the project, which is expected to be 2012, it said.Sanjay Reddy, vice-president of GVK Power said the project will be primarily funded by equity. He said that GVK will bring in other equity players and the company is hoping to raise around $1 billion at the holding company level, which will be used to repay a significant portion of the debt.However, a report in Business Standard said that this multi-billion dollar transaction is facing financial jitters as lenders are scaling down their exposure to this highly-leveraged transaction.The report, citing unamed sources said ICICI Bank and a consortuim of state-run  banks are looking to bring down their exposure considerably, resulting in a $250-million shortfall to be bridged.According to another  report in moneycontrol.com, Goldman Sachs retained a neutral on GVK Power with a target of Rs 23 a share. The report added that Hancock should generate about $50 EBITDA per tonne and ROE  in the 16-20 percent range. However, financing the deal is a key risk as GVK will have to invest Rs 600 crore over the next 15 months on its part, putting pressure on an already leveraged balance sheet.GVK Power & Infrastructure Limited is an India-based holding company and is primarily engaged in the business of providing operating and maintenance services, manpower and consultancy services and incidental services to owners of power plants and infrastructure companies.It operates in three segments: power, roads, and others, which includes special economic zone (SEZ), manpower, airport and exploration of oil and gas.The  company's assets are present in energy, airports, transportation verticals among others like oil and gas, industrial park, urban infrastructures.