UPDATE 1-India's GVK eyes $500-$600 mln unit stake sale-sources

Tue Jun 19, 2012 2:37am EDT

* Puts minority stake in Singapore arm on the block

* Singapore sovereign fund GIC in talks with GVK-sources (Adds details, background, share price)

By Indulal PM and Ketan Bondre

MUMBAI, June 19 (Reuters) - India's GVK Power and Infrastructure is seeking to raise $500 million to $600 million by selling a stake in its Singapore arm and is in talks with Government of Singapore Investment Corp for a potential deal, two sources with direct knowledge of the matter said.

The Indian developer of airports, power projects, roads and mines will sell a minority stake in GVK Coal Developers (Singapore) Pte Ltd, the sources said, adding that a deal may be a precursor to a Singapore listing of the unit that holds coal assets in Australia.

The sale will help fund the huge capital spending needed to develop the mines in Australia and reduce debt linked to the $1.26 billion purchase last year.

GVK Power is looking to sell a stake in GVK Coal Developers as soon as possible, Group CFO Issac George said on Monday, declining to identify prospective investors or the potential size of a deal.

"There are people who have approached us, who have shown tremendous amount of interest," he told Reuters.

A spokeswoman with the Singapore sovereign fund declined to comment.

GVK acquired the Australian assets to secure long-term coal supplies for the group's power projects in India and to meet demand in other regional markets.

Shares in GVK Power rose as much as 4.8 percent on Tuesday, beating a 0.3 percent gain in the broader Mumbai market, after the Reuters report on the likely stake sale in the unit.

Still, the group's market value of $384 million is only a fraction of what it was three years ago.

GVK Coal, whose Australian mines may produce 84 million tonnes of coal a year at full capacity, may have a bigger market value than its parent, one of the sources said, without elaborating.

Indian infrastructure builders have been struggling because the government has been dragging its feet on project approvals.

Private equity investments in Indian infrastructure slumped 60 percent to $183 million in 10 transactions during the quarter ended March from $459 million in 16 transactions a year earlier, according to industry tracker VCCircle.com.

Poor infrastructure is also a bottleneck to India's economic growth, which slowed to 5.3 percent in the March quarter, the weakest annual pace in nine years. (Additional reporting by Saeed Azhar in SINGAPORE; Editing by Ryan Woo)