GMR group to raise Rs 3,200 cr loan for developing Vizag int'l airport

GMR Group is planning to raise Rs 3,200 crore in term loans for developing Visakhapatnam International Airport, Andhra Pradesh.

The project cost has been estimated at over Rs 4,700 crore and the term loan conditions envisage a construction period of three years, a one-year moratorium, and a repayment tenor of 14 years.
 

Besides the debt component, equity contribution from promoters for the project has been pegged at about Rs 1,370 crore. The sponsor contribution requirement includes Rs 350 crore in the form of sub-debt, proposed to be raised during the construction phase.
 

GMR Group holds the airport business under the airport holding company, GMR Airports Ltd (GAL). GAL in turn has 100 per cent in GMR Visakhapatnam International Airport Ltd (GVIAL), a special purpose vehicle for the project.
 

GAL won the rights to develop and operate the airport through competitive bidding, and, subsequently, signed the concession agreement in June 2020 for a concession period of 40 years.
 

GVIAL is implementing the first phase with an annual capacity of six million passengers.
 

The promoter group has infused Rs 105 crore into the project and had liquidity worth Rs 200 crore as on September 30, 2023. This liquidity will be partly used to meet the upfront equity requirement of 40 per cent of pure equity (about Rs 410 crore) while the balance will be infused over the three-year construction period.
 

India Ratings has assigned the “BBB” rating with stable outlook for the proposed term loans. The rating reflects GVIAL’s moderate construction risk, significant traffic growth potential in the Visakhapatnam region, the stable regulatory regime of the airport sector, and a suitable debt structure.
 

The rating also takes into account the modest financial profile and long-standing experience of the sponsor in the airport sector and the sponsor’s commitment to supporting the project, India Ratings said.
 

The debt structure features creating one quarter of the debt service reserve within 60 days of the commercial operations date and another quarter to be created from project cash flows and sponsor support within six months of the date.
 

The debt terms stipulate the sponsor-infused funds in GVIAL will be unsecured and subordinated to the senior debt during the debt tenor.

The Contours

• Equity contribution from promoters pegged at about Rs 1,370 crore
   
• The sponsor contribution requirement includes  Rs 350 crore
   
• India Ratings has assigned “BBB” rating with a stable outlook for the proposed term loans
   
• GVIAL is implementing phase I with an annual capacity of six million passengers