Demerger of GMR Infra’s airport vertical, other businesses to be operational from today

V Rishi Kumar Hyderabad | Updated on March 31, 2021

A view of GMR Hyderabad International Airport

Expected to unlock value of businesses

The demerger of the airports segment of diversified infrastrucure company, GMR Infrastructure, and other businesses will be operational from April 1, , while some clearances, including that of NCLT, are awaited.

With the airports vertical making significant progress in terms of strategic stake sale, the management of GMR Infrastructure believes its true value could be better unlocked. In addition, it will enable divestment of some non-core assets in other businesses of highways, energy among others, according to an investor presentation filed with the BSE.

The move is aimed at value creation through deleveraging, vertical demerger and divestment of non-core businesses. These verticals will pave way for a pure-play of airports and other businesses, thereby attracting strategic investors or help raise capital, further reduce debt, simplify the corporate holding structure and enable both airport and non-airport businesses to chart out their respective growth plan independently. The move provides multiple platforms to raise funds, both from private and public, to grow their respective businesses.

Strategic partnership

GMR Infra had earlier entered into a strategic partnership with Groupe ADP of France with the sale of 49 per cent stake in GMR Airports (GAL), through which it raised ₹9,813 crore.

The other demerged entity GPUIL, which will have energy, highways, urban, EPC and other businesses under its fold will mirror the airports vertical. This will also pave the way for divestment of select assets in the energy, highways, and other businesses.

GMR is also at an advanced stage of divestment of some non-core assets including land at some of its projects and monetisation of the barge-mounted power asset.

The airports business has a distinct operating model as compared to other business verticals within the Group and its growth has outpaced the rest of the verticals.

Vertical split

The demerger will happen through a vertical split and result in listed companies — GIL and GPUIL and mirror shareholding of GIL in GPUIL. All the existing shareholders of GIL will become shareholders of GPUIL in the same proportion.

Following the completion of the process expected in the first half of fiscal 2022, GIL will become the only pure-play airports platform with strong cash flow generation potential. The two separately listed entities will be able to chart out their respective growth trajectories.

The demerger will also facilitate strategic partnerships at different platforms allowing businesses to raise capital and leverage synergistic advantages.

Shares of GMR Infra closed at ₹24.35, down 0.20 per cent on the BSE.

Published on March 31, 2021

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