Just a month after Adani Group forayed into India’s emerging airports space by winning bids for six airports, Tata Group has entered the segment by picking up 19.7 per cent stake in GMR Airports Ltd.

Tata Group, along with Singapore sovereign wealth fund GIC and Asia-focussed alternative asset management fund SSG Capital Management, will invest a total of ₹8,000 crore in GMR Airports.

Tatas would invest ₹3,650 crore. GIC and SSG will put in ₹2,670 crore and ₹1,780 crore respectively, making it possibly the largest foreign PE investment in India’s airports space. GIC and SSG will hold 14.8 per cent and 9.9 per cent, respectively. The deal will help GMR reduce its ₹20,000-crore debt to ₹12,000-₹13,000 crore.

GMR Infrastructure Ltd (GIL), the holding company of the airport unit, will retain management control with a 53.5 per cent stake, while the Employee Welfare Trust will hold 2.1 per cent.

The entry of Tatas into the airports space could end the duopoly in the sector. GVK, the other major player, recently consolidated its holdings in the airport business to thwart attempts by the Adani Group to acquire stake. However, GVK would need to divest some stake in the airport unit to settle its debt partially.

“Considering the airports sector has only four private airports and two groups operating them so far, there has been limited possibilities for any M&A activity. The significance of the GMR deal is that it is happening at the group-level, not at just at the SPV level, like in most of the cases so far,” Vishal Kotecha, Associate Director, India Ratings, said.

Siva Subramanian, Director, Ind-RA, said the entry of new players in the airports business indicates that the sector has matured with many regulatory hurdles having been eliminated.

Exit process

The GMR management expects the deal to be closed within three months. As part of the transaction, GIL will initiate the process of providing exit to existing private equity investors — Macquarie-SBI Infrastructure Investments Ltd, Standard Chartered Private Equity (Mauritius) III Ltd and JM Financial Old Lane India Corporate Opportunities Fund Ltd — which currently hold 5.8 per cent stake in the airports business.

The investors have pegged GMR Airports’ post-money equity valuation at ₹18,000 crore. In addition, the deal includes earn-out payments of up to ₹4,475 crore linked to achievement of certain milestones and performance metrics over the next five years.

As a result, the total valuation could reach ₹22,475 crore on a post-money basis. The group is demerging its highways, urban infrastructure and transportation businesses, leading to separation of the airport business.

The GMR Group has a portfolio of 159 million passenger capacity across airports, which include those in New Delhi, Hyderabad and Mactan Cebu.

It has bagged the mandate to develop airports at Nagpur, Goa, and Bhogapuram near Visakhapatnam.

 

Agencies add:

The deal will pump Rs 1,000 crore into GMR Airports, a unit of GMR Infrastructure Ltd. and purchase Rs 7,000 crore of the airport units equity shares from the parent, according to a statement. The deal values GMR Airports at Rs 18,000 crore, the company said in a filing.

GMR operates Delhi, Hyderabad and Cebu airports, while it is developing greenfield airports in Goa and Crete, Greece.

The deal will also provide exit to existing private equity investors that hold a 5.8 per cent stake in the airports unit. Shares of the New Delhi-based GMR Infrastructure rose 4.11 per cent in early trade in the BSE index Sensex.

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