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Business News/ Companies / News/  Pay Rs5,000 crore for terminating contract, GMR tells Maldives
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Pay Rs5,000 crore for terminating contract, GMR tells Maldives

GMIAL, a subsidiary of GMR Infra, submits a claim for damages to the tune of $803 million against Maldives govt and Maldives Airport Co. Ltd

GMIAL had secured a contract for the modernization and operation of Ibrahim Nasir International Airport in Maldives in 2010. But this contract was unilaterally terminated by the Maldives government. Photo: MintPremium
GMIAL had secured a contract for the modernization and operation of Ibrahim Nasir International Airport in Maldives in 2010. But this contract was unilaterally terminated by the Maldives government. Photo: Mint

Mumbai: GMR Male International Airport Pvt. Ltd (GMIAL), a subsidiary of GMR Infrastructure Ltd, has submitted a claim for damages to the tune of 4,987 crore against the government of Maldives and Maldives Airport Co. Ltd (MACL), the company said in an exchange filing on Friday.

GMIAL had secured a contract for the modernization and operation of Ibrahim Nasir International Airport in Maldives in 2010. But the contract was unilaterally terminated by the Maldives government, which subsequently initiated arbitration proceedings on 29 November 2012, seeking a declaration that the concession agreement was void from the outset.

GMIAL had disputed the termination of the contract.

In June, GMR Infrastructure said an international tribunal had declared the concession agreement to upgrade the Maldives airport valid. The tribunal also said the government of Maldives and MACL were jointly and severally liable for damages to GMIAL for loss caused by their repudiation of the concession agreement.

GMR Infrastructure has also made a plea to the tribunal for award of further damages for loss of reputation, it said in the statement. The arbitration proceedings are private and confidential, the statement added.

On Friday, shares of GMR Infrastructure ended up 0.25% at 20.15 each on BSE, while India’s benchmark Sensex index rose 0.95% to close at 28,334.63 points.

The Maldives government terminated the contract with GMIAL in 2012 after a regime change following a political crisis that led to the resignation of President Mohamed Nasheed.

In response to the termination of the contract, GMR, which also runs airports in Hyderabad and New Delhi, took the Maldives government to a court in Singapore. Elections in November 2013 handed the mandate of that country to Abdulla Yameen, who narrowly defeated Nasheed, whose government had signed the 25-year airport contract with GMIAL, a consortium of GMR Infrastructure and Malaysia Airports Holdings Bhd, in 2010.

GMR Infrastructure said in June this year that the tribunal declared the collection of airport development charges (ADC) and insurance surcharge (IS) allowed in the concession agreement to be lawful under Maldivian law.

The tribunal also said the agreement to adjust the shortfall arising out of non-collection of ADC and IS from the concession fee was lawful and binding on MACL and the government of Maldives.

Experts say the project was profitable and that GMR stood to gain, had it been executed.

“The project was profitable, and the company should be reimbursed for the damages, as they have already lost the contract. They have a strong case," said an analyst at a domestic brokerage firm. He requested anonymity because he is not authorized to talk to the media. “If they receive the damages, they will get cash, which can be used to retire debt."

According to an 18 August report by Elara Securities (India) Pvt. Ltd, the settlement of compensation for the Male airport is a key upside for the company.

The cost of the project was estimated at $500 million (around 3,095 crore today).

Meanwhile, GMR Infrastructure is also strengthening its balance sheet by selling shares in group firms and raising equity. It has in the past announced an asset light strategy in a bid to lower its debt. As of 30 September, it had consolidated debt of 40,110.83 crore, according to financial data provider Capitaline.

In July, the group’s chief financial officer Madhu Terdal told Mint that it will sell shares in group firms for the first time to the public. GMR Infrastructure has sought market regulator Securities and Exchange Board of India’s approval to raise up to 1,500 crore through a rights issue, or sale of stock to existing shareholders. The group also raised 1,477 crore in July by selling shares to qualified institutional investors.

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Published: 21 Nov 2014, 10:47 AM IST
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