MARKING THE entry of the second large conglomerate in India's airport business, a consortium of Tata Group, an arm of Singapore's wealth fund GIC, and Hong Kong-based SSG Capital Management will invest Rs 8,000 crore to buy a combined 45 per cent stake in GMR Airports Ltd, which operates Delhi International Airport Ltd, Hyderabad's Rajiv Gandhi International Airport and Mactan Cebu International Airport in the Philippines.
The deal will result in Rs 1,000 crore being pumped into GMR Airports, a unit of GMR Infrastructure Ltd, alongside the purchase of Rs 7,000 crore of the airport unit's equity shares from the parent, according to a statement. After the deal, Tata will hold 20 per cent stake in the airport unit, while GIC will get 15 per cent and SSG another 10 per cent, the company said in a filing. The deal values GMR Airports at Rs 18,000 crore.
For the Tata Group, which runs two airlines in India - Vistara, in partnership with Singapore Airlines, and AirAsia India, a joint venture with Malaysia's AirAsia group - the deal is expected to have implications in terms of broader market influence.
Last month, Adani Group won the bids to operate six airports - Ahmedabad, Jaipur, Lucknow, Thiruvananthapuram, Mangalore and Guwahati - marking the group's entry in the airports business and making it the third largest private airport company in India after GMR and GVK Group.
The increasing private investment in the airports sector could be on account of the government's plans to construct 100 new airports with an investment of about $60 billion in the next 10-15 years.
Currently, GMR and GVK run the four largest airports in the country, with the latter managing Mumbai International
Airport Ltd and Bengaluru International Airport Ltd.
The International Air Transport Association has projected that by 2037, there would be almost 520 million passengers flying to, from and within India each year.
However, in India, airports have not been a lucrative business. In 2017-18, as many as 94 airports owned and managed by the Airports Authority of India incurred losses. The government operator owns and manages 129 airports in the country. The Centre had said that the losses were mainly due to low revenue generation and to meet the total expenditure of the respective airports.
Following the deal for GMR Airports, which will take two to three months, the debt-laden infrastructure company will seek its board's approval to "restructure and demerge" the airports business, leading to its listing on the stock exchanges. "Airport is not an infrastructure play. It is a consumer play. We want to give minority investors exposure to pure play airport business also," said Sushil Kumar Modi, Group CFO for strategic finance, GMR.
GMR Infrastructure has a net debt of $2.9 billion as of December-end 2018, and has been selling off assets to pay liabilities.