PC: The Economic Times
On Wednesday, GMR Group said it had raised ₹6,300 crore in debt funding from the Abu Dhabi Investment Authority. Proceeds would be utilized in refinancing the debt of its promoter group entity, GMR Enterprises Pvt Ltd, which in turn happens to be the promoter of GMR Airports Ltd. The strategic step would bring about improvement in the financial soundness of GMR Group, which manages several airports in India and Southeast Asia.
Terms and Conditions of Funding
In a formal release, GMR Group has stated that it has entered into an agreement with the wholly-owned subsidiary of ADIA to invest the structured debt instruments amounting to ₹6,300 crore in GEPL. However, the all deal is subjected to compliance with all conditions and regulatory approvals required for it, thereby underlining the need for proper due diligence in large-scale financial agreements.
After this transaction, GMR Group is likely to utilize the amount realized to liquidate all external debt outstanding of GEPL, thereby bringing a sharp reduction in promoter group pledging on its shareholding in GAL. This would facilitate GEPL to align its capital structure with fewer lenders and a single source of funds.
Strategic Implication for GMR Group
Founder and GMR Group Chief G M Rao-controlled GMR Enterprises Pvt Ltd has corporate chairman Kiran Grandhi state that the group had been continually working to reduce corporate debt, pointing out that the company had travelled significantly down this road in recent years. He added that this capital would be essential to sustain the growth prospects of GMR Airports Ltd, which recently got morphed into a pure-play, publicly listed airport platform through strategic mergers and demergers.
Apart from debt reduction, GMR Group had to undergo structural changes, including the demerger of GMR Power and Urban Infra Ltd from GMR Airports Infrastructure Ltd. This was designed to free up GMR Group to focus more intensively on the core operations of airports, thereby strengthening its market position within the aviation sector.
Growth Prospects in India’s Aviation Sector
These investments by ADIA are a reflection of growing confidence in the aviation sector of India, which is considered to have high growth prospects. This investment is in line with ADIA’s strategy to support companies that are developing world-class transport assets as stated by Khadem AlRemeithi, Executive Director of the Infrastructure Department at ADIA. He further says that with positive long-term fundamentals of the Indian economy combined with the trajectory of demographic growth and increased economic connectivity, the aviation sector is an attractive opportunity for investment.
GMR Group operates the major Indian airports, which include Delhi, Hyderabad, and Goa. The company also operates two international airports in the Philippines and Indonesia. The strategic importance of the expansion of the company’s airport operations positions it well both as a leading player in its region and potentially for further growth.
In conclusion, the ₹6,300 crore funding by ADIA has now become the crucial milestone for GMR Group to settle its fundamental base financially as well as the operational capability at its platform. GMR Group fine-tuned its debt and closed the financial structure, propelling growth for GMR Airports Ltd while taking up growing opportunities in India’s aviation sector. In days ahead, the company will also attract keen eyes at how such strategic funding allows GMR Group to expand its operations and efficiency in managing airports in the competitive landscape.
