Lanco in talks to sell stake in Griffin coal mine

11 Oct 2014

Lanco Infratech Ltd (Lanco), a private sector infrastructure company controlled by billionaire L Madhusudhan Rao, is in talks with investors to sell its stake in Australia's Griffin coal mine and some road projects as part of its debt redemption plan.

Hyderabad-based Lanco, which has been negotiating with lenders to restructure its Rs36,000 crore debt pile since last year, has been seeking to sell assets to return to profitability and repay debt.

In August, Lanco sold its Udupi power plant to Adani Power at an enterprise valuation of Rs6,000 crore. The move was aimed at reducing Lanco's debt of Rs36,700 crore. While Lanco wqas to receive Rs2,000 crore in cash, Adani Group were to take over debt of Rs4,000 crore.

Last month the company said it would sell power projects to raise $825 million to pay down debt.

Lanci,, which acquired Griffin Coal Mining Co for about $760 million in 2011, plans to increase annual mining capacity at the largest coal mine in Australia four-fold to around 18 million tonnes by 2018, according to the company's web site.

In a filing with the stock exchange, the company said discussions were in progress with "some strategic/financial investors" over a possible stake sale, but added that the discussions were preliminary and no definitive action was in process.

Lanco, which produces power, builds roads and constructs residential and commercial buildings, has been trying to get out of the debt trap since July last year.

But analysts say, with most of Lanco's projects facing litigation related to fuel supply, cost of generation and/or off-take disputes, apart from rising interest payments on its loans, may find it difficult to get out of the debt trap with a cash-flow crunch.

Stake sale will not help Lanco resolve its cash-flow crunch in the near term, and for that it will have to rejig operations, say analysts.