The GMR Group, which has recently announced the demerger of its airports business and other verticals, plans to consolidate its airports business while eyeing selective divestment opportunities in the power segment, including its barge mounted project, highways and coal, to monetise some assets.
Given the tough business environment due to Covid, GMR’s focus is on reducing debt and improving cash flow and profitability.
After its first quarter numbers and ahead of its 24th Annual General Meeting, the company management, through its Investors Presentation, and the Group Chairman GM Rao, in his address to shareholders, indicated how its airports business, with major investments, is well poised for the next phase of growth.
Strong growth drivers
“In line with our strategy, we believe that in spite of the ongoing turbulence, the airport business has huge underlying strength and will continue to be the growth engine for the Group. The fundamental long-term growth drivers for the Indian economy and aviation sector remain intact and strong. We are actively pursuing suitable airport opportunities in India as well as globally,” GM Rao Chairman, GMR Group, said in the company annual report.
The company operates Indira Gandhi International Airport at Delhi, Rajiv Gandhi International Airport at Hyderabad in India and Mactan Cebu International Airport in the Philippines. It has two assets under development — Greenfield Airport at Mopa, Goa and Crete International Airport in Greece where it is being executed with Greek partner TERNA Group. It has also bagged few other airport projects that include Bhogapuram and Bidar.
Also read: GMR Infrastructure rejigs holding structure with airports as one entity, rest in other
The Hyderabad airport expansion, which has been well funded, is insulated in the near term from the disruptions caused by the pandemic. “Further, to ensure judicious use of funds during the pandemic, we continue to look at partially rescheduling future capital expenditure,” he said.
For the Delhi airport, GMR had raised $350 million from overseas bond of 10 years tenor and followed it up by raising additional $150 million. “However, to ensure prudent use of funds during the pandemic, we have considered postponing parts of planned capital expenditure to subsequent periods,” Rao informed shareholders.
The airports in India were witness to a strong growth momentum, which was disrupted due to Covid, necessitating caution in capex spend.
In the energy sector, in line with the effort towards liquidity enhancement and debt reduction, it managed to execute the debt resolution plan for GMR Rajahmundry Energy Limited and concluded divestment of GMR Chhattisgarh Energy Limited. The gas-based assets of the company are well suited for round-the-clock clean energy by bundling with renewable which has received government focus recently.
According to the company, the cash flow from thermal assets is sufficient to service debt, there are strong prospects for divestment of thermal assets given improved performance. And for the monetisation of Barge Plant, an agreement has been signed and partial consideration received.
On the highways, it plans to pare its debt following a favourable judgment in an arbitration claim on Hyderabad-Vijayawada and Chennai ORR4. The monetisation to gain momentum post arbitration claim settlement.
With regard to its coal assets, it plans to re-start the process of divestment once coal prices stabilise.
The company also sees potential to monetise its various land assets at the airports and also its assets in strategic industrial locations — GMR Krishnagiri Special Investment Region and Kakinada SEZ Limited to benefit from manufacturing dislocation from China. It has a pool of about 10,500 acre that has significant potential to unlock large latent value.
During the AGM slated to be held on September 21, it plans to seek shareholders nod for an enabling resolution to raise up to ₹5,000 crore in one or more tranche(s), through issue of securities.