The Tata group is partnering with Singaporean state-run sovereign wealth fund GIC NSE 7.81 % and Hong Kong’s SSG Capital to buy close to a 40% stake in GMR Infra’s airports holding company, said two people in the know.
The Tatas will hold a minority stake of 20% in the airport holding company while GIC and SSG will hold the rest, said one of the people cited above. The consortium has likely valued GMR Airports Ltd at over Rs 16,000 crore.
This will mark the second corporate behemoth’s entry into India’s airport sector this year. Recently, the Adani Group won bids to operate five airports owned by the state-run Airports Authority of India across the country. Private airports in India have largely been a duopoly between GMR and its rival GVK Power and Infra that runs that Mumbai airport and has the mandate for the second airport in the city, India’s costliest airport project. Fairfax Holdings of Canada born Indian billionaire Prem Watsa runs the airport in Bengaluru having bought it from GVK. The Tata group runs two airlines in India—Vistara and AirAsia India—in partnership with Singapore Airlines and AirAsia Berhad, a Malaysian low fare carrier.
The Tata-GIC-SSG trio beat Japanese diversified conglomerate Mitsubishi—the other entity GMR had been in advanced talks with—to clinch the deal. The money raised will primarily be used to retire part of its Rs 20,000 crore of net debt.
ET had first reported GMR’s talks with GIC and Mitsubishi on Feb 19. Queries to GMR and GIC remained unanswered. A Tata Sons spokesperson declined comment.
Post the investment, the consortium will be part of GMR’s five key airport projects in India and overseas. This follows GMR’s recent announcement to demerge its airports holdco.
“The agreement is there but there are several conditions precedent that have to be met,” said the person cited above.
India’s infrastructure companies have in recent months been trying to sell shares and retire debt. Spanish conglomerate Ferrovial, Canadian pension fund PSP and UAE-based sovereign fund Abu Dhabi Investment Authority recently submitted final bids for a minority stake in the airport’s business of GVK.
GMR’s airports business posted a profit before tax of Rs 365 crore for the October-December quarter, compared to a profit of Rs 394 crore a year earlier.
The conglomerate has for the last couple of years made efforts to divest its airport company, including via an IPO. It has spoken to various companies including the Abu Dhabi Investment Authority (ADIA) for a stake in its Hyderabad airport. It has done so even as it cautiously bids for Indian and international airport projects.
The parent company GMR Infra currently owns 91.95% of GMR Airports.
It currently operates the airports in Delhi India’s busiest-and Hyderabad—the country’s fourth busiest. In October, it won the privatisation contract for the Nagpur airport and the year before to build a new airport in Goa. Also in 2017, it won a contract to develop and operate an airport in Crete islands, Greece. It has also operationalized the Mactan-Cebu international airport in the Philippines. The consortium of GMR-Megawide has also submitted a proposal for the long-term development of the airport, including the construction of a second runway with the National Economic Development Authority (NEDA).
In the last four years, GMR Infra has, at the group level raised Rs 1,480 crore via a qualified institutional placement of shares, Rs 1,400 crore via a rights issue and Rs 2,000 crore via issuance of foreign currency convertible bonds from Kuwait Investment Agency. In 2016, it received a compensation of $271 million after a long drawn legal battle with the Maldives government on an airport project. It also issued international bonds of $812 million via the Delhi airport and $350 million via the Hyderabad airport. Last year, GMR agreed to pay Rs 3,560 crore to private equity firms SBI Macquarie, Standard Chartered Private Equity and JM Financial Old Lane in return for their entire holding of compulsorily convertible preference shares in the airport holding company. The PE investors also agreed to acquire a 5.86% stake in the airports company valuing it at over Rs 20,000, higher than what GIC is said to be valuing it at.
The Tatas have been trying to get into the airports sector. They have in the past tied up with Ferrovial to bid for projects such as the Navi Mumbai airport.
