GMR Infra raises Rs 2,000 crore from Tata Sons, GIC

GMR Infra – the operator of India’s busiest airport in Delhi and fourth busiest in Hyderabad – has raised Rs 2,000 crore debt through non-convertible debentures from Tata Sons and Singaporean wealth fund GIC to retire earlier loans.

This deal offers much-needed relief from the deadly combination of burgeoning debts amid sliding revenue which strangulated its growth objective.

Hence, GMR was looking at various options to pare it’s over Rs 20,000 crore debt.

The planned deal values GMR Airports at close to Rs 18,000 crore.

Added to ‘earnouts’ of up to Rs 4,475 crore over the next five years, it will take the total value of the firm to Rs 22,480 crore after the stake sale is consummated.

Earnouts are in the nature of estimated earnings based on certain performance milestones agreed upon between the management and investors.

Last year, Tata-GIC and Hong Kong-based SSG signed a pact with the conglomerate invest Rs 8,500 crore in its airport business for a 45% stake.

The move hit a hurdle due to a rule which prohibited the purchase of more than a 10% stake in any airport by a firm that already owns an airline.

More than a dozen lenders — including US private equity giant KKR’s NBFC arm, Yes Bank, Srei Infrastructure, HDFC, L&T and Piramal Group — have either given loans or subscribed to non-convertible debentures (NCD) of the GMR group.

Lenders hold GMR Infra shares as collateral in some cases.
Tata Sons owns close to half in two Indian carriers Vistara and AirAsia and the proposed 20% stake in GMR’s airport business would give it a 12.8% stake in the Delhi International Airport Ltd (DIAL), the consortium that runs Delhi airport.

GMR Infra, through GMR Airports, owns 64% in DIAL.
GMR is building a new airport in Goa.

It has received a letter of intent for the development and operations of Nagpur airport and has emerged as the highest bidder for developing and operating an airport in Bhogapuram, Andhra Pradesh.

It operates the Mactan-Cebu International Airport in the Philippines and is building a new airport in Crete island, Greece.

What do all these developments mean for retail shareholders if GMR Infra?
For the shareholders the company has been a big wealth destroyer as in the last 10 years the Roce has never crossed 10% and as in Sept 2019 total loans have touched Rs 31000 crs with the net loss in H1 if FY20 standing at Rs 894 crs

Will the business recover soon?
Well, the big hope us in the restructuring of the company’s business wherein every investor is hoping that the airport business will get a big valuation. Well, this may be true but running a large capital intensive business is not easy and the airport monetization will take a long time maybe next 3 years. Also, the company holds large pieces of land which it plans to monetize ahead but here again it’s a long road ahead as this will also take a long time ahead

The GMR Infra stock was Rs 15 sometime in Sept 2019 from where it has already moved up by 60% purely on hope and rampant speculation from traders.

Investors should remember that the GMR Group has never created wealth in the last decade so going ahead only if operating metrics improve then only there is hope otherwise it will just be hope without any solid financial numbers which the markets are waiting to hear from a long time.

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