BackLong wait for equity investor gives GMR ₹4,000 crore windfall
While waiting for almost a year to close its stake sale to a Tata group-led consortium, GMR won two more airport bidsThe GMR Group’s higher valuation indicates the growing clout of airports in the retail segment
PremiumGMR Group has reaped a windfall gain from a year-long delay in securing government approval for a potential investment by a Tata group-led consortium in its airports business which saw the debt-laden group’s valuation surge more than 22%, or ₹4,000 crore.
Last week, GMR Infrastructure Ltd announced a strategic partnership with France’s Groupe ADP for its airports business, which is now valued at ₹22,000 crore. This is significantly higher than the enterprise value of ₹18,000 crore pegged to the business in an offer made last March by a consortium, comprising the Tata group, Singapore’s GIC Pte. Ltd and Hong Kong-based SSG Capital Management Ltd.
Groupe ADP, whose flagship airport holdings include Paris-Charles de Gaulle, Paris-Orly and Paris-Le Bourget, will pick up a 49% stake in GMR Airports, giving the former a reasonable foothold in India’s rapidly-growing airports market, while injecting equity into one of the country’s most experienced airport operators.
For GMR Infrastructure, the delay in closing its stake sale to the Tata-led consortium has proved to be a blessing in disguise. GMR took the intervening year, while waiting for regulatory approvals, to win two more airport bids—a greenfield airport at Bhogapuram, in the outskirts of Visakhapatnam, and the Nagpur airport privatization contract from state-run Airports Authority of India.
The higher valuation also indicates the growing clout of airports in the retail segment, where investors are becoming increasingly open to offer more premium for consumer retail opportunities offered by airports in major metros in India.
In a recent report, Shishir Baijal, chairman and managing director, Knight Frank India, said: “Today, non-aeronautical revenue has become a very vital component to measure an airport’s health and success. The rise in the number of global travel passengers and the changing demographics are bringing a paradigm shift in how retail, and food and beverage offerings are viewed at an airport. Agreeably so, airports are no longer mere transit hubs, but are emerging as retail destinations catering to the well-heeled consumer."
GMR’s December quarter results showed aeronautical revenue growing 2% year-on-year at its flagship airport in New Delhi, trailing a 12% rise in non-aeronautical revenue in the same period. Non-aeronautical revenue streams include food and beverage sales, duty-free shopping, ground handling charges and car parking fees. The Hyderabad airport, also managed by GMR, showed aeronautical revenue grow 6% year-on-year, while non-aeronautical revenue jumped 20%.
Underscoring the opportunity in transit retail, real estate consultancy Knight Frank estimated that just the retail revenue at GMR-managed Indira Gandhi International Airport was $440 million in 2019, double the $220 million earned by Select Citywalk mall, one of the largest in the National Capital Region.
GMR hopes that the partnership with Groupe ADP “will also open up new opportunities for route development, enhanced expertise in operations, retail, information technology, innovation, engineering and many more areas," said GMR in a statement.
GMR Airports and Groupe ADP handled a combined $336.5 million in 2019, the highest in the world.
GMR Group’s airport portfolio has a combined passenger capacity of 172 million, in operation and under development, comprising India’s busiest Indira Gandhi International Airport, New Delhi, Hyderabad’s Rajiv Gandhi International Airport and Mactan Cebu International Airport in partnership with Megawide in the Philippines. Greenfield projects under development include the Mopa airport in Goa and at Heraklion, Crete, Greece in partnership with GEK Terna. The GMR-Megawide consortium has won the Clark International Airport’s EPC project.
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