Tata, GIC and SSG Capital to buy 45% in GMR Airports for Rs8,000 cr
27 March 2019
A consortium of investors, which includes Tata Group, Singapore sovereign wealth fund GIC and SSG Capital Management, has agreed to invest Rs8,000 crore to acquire a 45 per cent equity stake in GMR Airports Ltd (GAL), the airports infrastructure business of GMR Infrastructure.
GIL said it has signed a binding term sheet with the investors pursuant to which the investors have agreed to invest Rs8,000 crore in GMR Airports Limited (GAL), which includes Rs1,000-crore equity infusion in GAL and Rs7,000 crore towards purchase of GAL’s equity shares from GIL and its subsidiaries.
The proposed investment is subject to definitive documentation, customary regulatory approvals, lender consents and other approvals, GMR stated in a release.
Following the investment, GIL proposes to demerge its energy, highways, urban infrastructure and transportation businesses, leading to separation of its airport business, subject to customary consents, regulatory and corporate approvals.
GMR said the investment by marquee investors will help GIL improve service delivery and create a world class portfolio of airport assets, besides paving the way for restructuring of the business by way of demerger.
As part of the terms of the proposed investment, GIL will retain management control over the airports business with the investors having customary rights and board representation at GAL and its key subsidiaries.
The proposed investment values GAL’s 100 per cent equity at Rs18,000 crore, besides earn-outs of up to Rs4,475 crore, linked to achievement of certain agreed milestones and performance metrics over next 5 years, thereby assuming total valuation of Rs22,475 crore.
As part of the transaction, GIL also intends to provide exit to existing private equity investors who hold 5.8 per cent equity stake in GAL. At closing, GIL and its subsidiaries will hold 54 per cent stake in GAL, Tata will hold 20 per cent stake, GIC will hold 15 per cent stake and SSG will hold 10 per cent stake, with Employee Welfare Trust also holding a stake in GMR’s airports business.
“We are very pleased to welcome Tata, GIC and SSG as long-term investors in GAL. The proposed investment endorses the strength of the unparalleled airport platform created by GMR Group and will reduce our debt substantially, strengthening our balance sheet,” Grandhi Kiran Kumar, managing director and CEO of GIL, said.
GMR said the proposed investment by marquee investors like Tata, GIC and SSG reaffirms the significant and long-term investment opportunity in the fast growing airport infrastructure space with a large pool of capital that can be tapped to grow GMR airport infrastructure business.
GMR Infrastructure Limited, a leading global infrastructure conglomerate with interests in airport, energy, transportation and urban infrastructure, is listed on Indian stock exchanges.
GMR Group’s airport portfolio has around 159 million passenger capacity in operation and under development, including India's busiest Indira Gandhi International Airport in New Delhi, Hyderabad’s Rajiv Gandhi International Airport, Mactan Cebu International Airport in partnership with Megawide in the Philippines.
Greenfield projects under development includes airport at Mopa in Goa and airport at Heraklion, Crete, Greece in partnership with GEK Terna. The GMR Megawide consortium has won the Clark International Airport’s EPC project, its second project in the Philippines. The group recently received Letter of Intent for development and operation of Nagpur Airport on PPP basis and development and operation of greenfield airport at Bhogapuram in Andhra Pradesh. It is also developing smart cities adjacent to Delhi and Hyderabad airports.
The group’s energy business has a diversified portfolio of around 6,800 MWs, of which 4,500 MWs of coal, gas and renewable power plants are operational and around 2,330 MWs of power projects are under various stages of construction and development. The group also has coal mines in Indonesia, where it has partnered with a large local player.
GMR’s transportation and urban infrastructure division has six operating highway projects spanning over 2,000 lane km. The group has a large EPC order book of railway track construction, including Government of India’s marquee Dedicated Freight Corridor project. It is also developing multi-product special investment regions spread across 2100 acres at Krishnagiri in Tamil Nadu and 10,400 acres at Kakinada in Andhra Pradesh.