For GMR group, in its demerged avtaar, airports division is a bigger star

The group's non-airport entity is still work in progress in terms of stronger liquidity and asset exits

More than two years since GMR Group initiated a demerger, the airport business continues to outpace the group’s non-airport unit in terms of growth and attracting investors.

In 2021, the group initiated a demerger for its then sole listed unit — GMR Infrastructure, into two listed entities — GMR Airports Infrastructure (GIL) and GMR Power and Urban Infra (GPUIL). While the former is its airport business, GPUIL is the non-airport unit.

The aim of the demerger was to allow the airport and non-airport businesses to chart out their respective growth plans and facilitate strategic partnerships at different platforms.

While the airport business continues to attract investors as envisaged, transformation of the non-airport business into an energy vertical is still work in progress.

An email query sent to the GMR group remained unanswered. 

In March this year, GIL raised Rs 2,900 crore from Groupe ADP through 10-year foreign currency convertible bonds (FCCBs). The proceeds were to be utilised for debt reduction at GIL and GPUIL.

Other investments in GIL this year include a Rs 675-crore compulsorily convertible debenture (CCD) investment from National Investment Infrastructure Fund (NIIF) in its Bhogapuram airport announced last week. It is part of a financial partnership agreed to in 2022.

Rajiv Jain-led GQG Partners also picked a 4.7 per cent stake in GIL from the open market earlier this month.

“The airport business is a long-term asset, ideal for patient capital like GQG, which seems to be interested in long-term infra assets,” said an analyst with a domestic brokerage firm.

An email query sent to Jain on Friday remained unanswered.

Meanwhile, agencies rating GPUIL note that liquidity remains a concern, despite monetisation of assets and timely debt repayment in FY23.

“It is typical of conglomerates to merge and demerge, depending on market dynamics. It helps attract investors and better valuations by separating different lines of businesses, provided there are multiple,” said Harish HV, founder and managing director at ECube Investment Advisors.

Part of the demerger plans was to divest from the highway portfolio and monetise assets in two special investment regions – Krishnagiri and Kakinada as well as create an energy platform. 

“The company has been able to undertake sale of the Krishnagiri land parcel and utilised proceeds from arbitration claims towards reduction of corporate debt in FY23. In September 2022, it divested its entire stake in PTGEMS Indonesia for $420 million. It has been used towards reduction of standalone and project debt,” rating agency Infomerics noted in a note on GPUIL.

As of September 2023, GPUIL had a gross consolidated debt of Rs 5,500 crore against Rs 8,300 crore in March 2022. The Infomerics note added that GPUIL’s liquidity remained stressed with limited buffers.

GPUIL is yet to fully realise its stated intent to exit its highways portfolio and fully monetise the special investment regions.

“Not much is happening in the power and infra vertical. There is more action needed in terms of cleaning up on the debt side,” added the analyst quoted earlier.

In its September 2023-ended quarter update, GPUIL reported a loss of Rs 120 crore, largely impacted by losses in some of its highway projects.

For GIL, the September quarter loss was at Rs 190 crore, which the company said was due to ramp up of operations, seasonality and Go First flights’ suspension impact. GIL’s debt for the quarter was at Rs 28,800 crore, against Rs 26,300 crore in March 2022.

Analysts had earlier noted that GIL’s high debt is on the back of a $2.5-billion capital expenditure into expanding capacities in Delhi and Hyderabad assets and setting up the greenfield airport in Goa.