Tatas to enter airport business with GMR stake buy

Mumbai: Salt-to-software conglomerate the Tata Group has made an entry into the airport business by investing in GMR Airports, a subsidiary of GMR Infrastructure.

A consortium of Tata Group, an affiliate of Singapore’s sovereign wealth fund GIC and Hong Kong-based SSG Capital Management will invest Rs 8,000 in GMR Airports.

Announcing the deal GMR Airports’ parent company GMR Infrastructure said, “GMR Infrastrcuture has signed a binding term sheet with the investors pursuant to which the investors have agreed to invest Rs 8,000 crore in GMR Airports. The investment amount of Rs 8,000 crore will consist of Rs 1,000 crore equity infusion in GMR Airports and Rs 7,000 crore towards purchase of GMR Airports’ equity shares from GMR Infrastructure and its subsidiaries.”

Post the Rs 8,000 crore investment, GMR Infra will hold 53.5 per cent stake in GMR Airports, Tata Group will hold 19.7 per cent stake by investing Rs 3,560 crore, GIC will hold 14.8 per cent by investing Rs 2,670 crore, SSG will hold 9.9 per cent by investing Rs 1,780 crore and the Employee Welfare Trust will hold 2.1 per cent stake.

The deal will reportedly help the company cut its debt and also provide an exit for private equity investors such as Macquarie, Standard Chartered and JM Financial from the company’s airports business.

GMR Infra’s airports business, under which it manages airports in New Delhi and Hyderabad, is the cash cow of the group with over two-thirds of revenue and half the profit coming from the business.

After the deal, the company’s net debt will fall to Rs 12,000 crore, from Rs 20,000 crore in December 2018, while GMR Airports’ debt will halve to Rs 1,000 crore, a Reuters report said.

Commenting on the deal, Grandhi Kiran Kumar, Managing Director & CEO, GMR Infrastructure, said, “We are very pleased to welcome Tata, GIC & 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.”

As part of the terms of the proposed investment, GMR Infrastructure will retain management control over the airports business with the investors having customary rights and board representation at GMR Airports and its key subsidiaries.

GMR Infrastructure shares were volatile and rose over nine per cent intra-day but closed almost flat at on the BSE after rising to 21.25.