GMR Infrastructure rejigs holdings in airports

Untangles holdings across group companies and consolidates at Holding level

 

GMR Infrastructure has changed the course of its airports’ business. The infrastructure major has started the process of transferring its shareholdings in three airports to a holding company. The move is being seen as a precursor to an initial public offering in the next financial year and a platform for private equity investors to exit.

The listed infrastructure major and its step-down subsidiary, GMR Energy, have direct stakes in the Delhi International Airport (54 per cent), in the Hyderabad International Airport (63 per cent), and the Istanbul Sabiha Gokcen International Airport (40 per cent).

The Delhi airport holdings, worth Rs 2,500 crore at face value, have been transferred to GMR Airports Ltd, the holding company for the airport vertical. The other airports’ holdings are yet to be transferred.

GMR Infrastructure now hold 97 per cent in GMR Airports Limited. The rest would be held by the employee welfare trust of GMR.

A senior management official said: “We have been working on creating three distinct holding companies, for airports, power and highways, and this is a move in that direction. We feel the airports’ business, which accounts for as much as 50 per cent of our revenue, is stabilising and turning the corner ... we felt this was the time to effect this.”

It is understood that apart from creating a platform for a public offering, GMR Infrastructure was making this strategic move to help a clutch of private equity investors exit at a decent valuation.

Five private equity funds  — Macquarie SBI Infrastructure Investments, Standard Chartered, JM Financial-Old Lane, Build India and JM Financial — had invested $331 million in the airport assets company through compulsorily convertible preference shares in April-July 2011. An exit was expected by May 2014.

GMR Infra was said to be eyeing a public issue of Rs 2,000 crore in 2013-14 for the airport arm. The vertical had reported net revenue of close to Rs 4,500 crore of GMR Infra’s annual net revenues of Rs 8,300 crore. The airports business, a negative on the balance sheet, had reported positive numbers in the past two quarters. An increase in the fee at Delhi International Airport and an uptick in passenger movement had come to its rescue. The vertical was also expected to see better operating margins, when regulators approve GMR’s request to increase passenger fees at the Hyderabad airport.

GMR Infrastructure’s stock on Friday gained six per cent to close at Rs 22.10 on the National Stock Exchange. The stock had lost around five per cent in the week, on weak second quarter numbers, when its net losses had more than doubled. GMR is in the midst of a an arbitration process after being evicted from managing the Male International Airport. The company had secured a 25-year contract to upgrade and manage the airport. The infrastructure major was looking at a compensation of at least Rs 1,500 crore and had filed a claim.

TIGHTENING THE GRIP
GMR Infrastructure now holds ...

97% in GMR Airports Limited which in turn holds

54%  in Delhi International Airport / - (Passenger capacity - 60 mn) / (Traffic in FY 2013 - 34.37 mn) / (Project cost - $2.1 bn)

63%  in GMR Hyderabad International Airport / (Capacity - 12 mn) / (Traffic in FY 2013 - 8.38 mn) / (Project cost - $487 mn)

40% in Sabiha Gokcen International Airport in Turkey / (Capacity - 25 mn) / (Traffic in FY 2013 - 15.34 mn) / (Project cost - $601 mn)