GMR Infrastructure Ltd. today announced that a consortium of a Tata Group company, Singapore’s sovereign wealth fund GIC and SSG Capital Management have agreed to invest around Rs 8,000 crore in its airports business.
There will be an equity infusion of Rs 1,000 crore in GMR Airports Ltd. while Rs 7,000 crore will be used towards the purchase of its equity shares from the listed entity as well as its subsidiary. GMR said the proposed investment is subject to definitive documentation, lender consents, regulatory and other approvals.
The company plans to de-merge its airports business—which contributes 60 percent of its revenue—into a separate entity from its energy, highways, urban infrastructure and transportation businesses.
GMR Infra would hold a 54 percent stake in its airport business, while Tata Group, GIC, and SSG would hold 20 percent, 15 percent, and 10 percent stake, respectively, at the close of the investment.
The management said the move will lead to deleveraging at GMR Infra and pave the way for a restructuring of the business by way of a demerger. “The proposed investment…will reduce our debt substantially, strengthening our balance sheet,” its Managing Director and Chief Executive Officer Grandhi Kiran Kumar said.
GMR Infra will retain management control over the airports business with the investors having customary rights and board representation at GAL and its key subsidiaries. The company has a net debt of about Rs 20,000 crore, out of which Rs 6,800 crore is due to the airport arm.
The deal values GMR Airports at an equity valuation of Rs 18,000 crore. The market capitalization of GMR Infra as of Tuesday’s close was Rs 11,740 crore.
GMR said there are earn-outs of up to Rs 4,475 crore linked to the achievement of certain agreed milestones and performance metrics over the next five years. The management said that assuming all earn-outs are successfully consummated, the total valuation for the airports on post money basis will be Rs 22,475 crore.
Last month, GMR had constituted a sub-committee of its board for a possible spin-off of the airport business as it sees a $100-billion investment opportunity in India.