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Hyderabad airport lays down steep terms for duty-free shops

Hyderabad airport lays down steep terms for duty-free shops
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First Published: Tue, Apr 27 2010. 11 03 PM IST

Flying out: A file photo of the Hyderabad airport. Airport retail firm Nuance, which had a JV with Shoppers Stop, is exiting after two years. Bharath Sai/Mint
Flying out: A file photo of the Hyderabad airport. Airport retail firm Nuance, which had a JV with Shoppers Stop, is exiting after two years. Bharath Sai/Mint
Updated: Tue, Apr 27 2010. 11 03 PM IST
New Delhi/Mumbai: GMR Group has laid down fresh terms for firms looking to run duty-free shops at the Hyderabad airport, two people familiar with the matter said.
GMR Hyderabad International Airport Ltd (Ghial) will invite bids shortly for a duty-free operator after Nuance Group AG, the world's leading airport retail firm, decided to exit by end-May.
An executive at an international duty-free operator, who visited the Hyderabad airport on Monday as part of a tour of its retail facilities for potential bidders, said GMR has set “steep” financial terms for the contract winner, including a one-time fee of Rs30 crore to be paid within a few days of winning the bid.
“This is something new and very ambitious,” said the executive. “Even if you are aggressive and do extremely well, it will take five-seven years to recover the Rs30 crore down payment you make.”
Flying out: A file photo of the Hyderabad airport. Airport retail firm Nuance, which had a JV with Shoppers Stop, is exiting after two years. Bharath Sai/Mint
The executive, who didn’t want to be named, said GMR will invite bids on a revenue-sharing basis for 15 years. The firm pledging the highest percentage of revenue share would win the contract.
An executive at Ghial confirmed the terms on condition of anonymity.
A GMR spokesperson declined to comment on the terms, but said the company is “interested in a mutually rewarding, long-term contract”.
The Hyderabad airport operator has received expressions of interest from several local and global duty-free operators, the spokesperson said, without naming the companies.
GMR expects a new duty-free operator to start business at the airport from June.
The executive at the duty-free operator quoted earlier said Spain’s Aldeasa SA, Dubai’s Flemingo International Ltd, Switzerland’s Dufry AG, Hong Kong-based DFS Group Ltd, state-owned India Tourism Development Corp. (ITDC), and a joint venture (JV) of Gurgaon-based IDFS Trading Pvt. Ltd and Ireland’s Aer Rianta International are potential bidders.
Mint could not independently confirm this with each company.
Zurich-based Nuance, which had a JV with Shopper’s Stop Ltd called Nuance Group India Pvt. Ltd, is exiting the Hyderabad airport after two years of operations.
A GMR spokesperson said the venture had failed to “reach its full potential” in the first year of operation. Nuance Group India held discussions with GMR to amend its contract, but an agreement could not be reached, the spokesperson said. Rolf Blaser, chief executive of Nuance in India, declined to comment.
“The primary reason for Nuance exiting Hyderabad was that it got personnel policy wrong. There were no long-term planning or strategy and perspective about doing business in India,” said C. Ruthnaswamy, an independent consultant at Ruthnaswamy and Associates. Ruthnaswamy ran duty-free shops for 20 years and was with ITDC.
The venture is facing trouble in Bangalore as well. The Karnataka high court in December 2008 scrapped the award of the airport’s duty-free contract to the Nuance JV after Flemingo filed a case, alleging it had been illegally excluded from the bidding by Bangalore International Airport Ltd. Nuance Group India has challenged the verdict in the Supreme Court.
rasul.b@livemint.com
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First Published: Tue, Apr 27 2010. 11 03 PM IST