HYDERABAD: GMR Infrastructure, which has interests ranging from airports and roads to power sector, on Friday said it proposes to hive off its profitable airports division to unlock shareholder value and capitalise on the USD 100 billion Indian airports business opportunity.
“With a view to unlock shareholder value, GMR Board has decided to form a sub-committee to consider and evaluate various possible options of demerger to facilitate value unlocking in existing businesses of the group,” it said in an investor presentation filed with stock exchanges. GMR has already received multiple proposals from investors for the airports business, which are currently being evaluated and shall be placed at the meeting of the newly formed sub-committee.
For GMR Infrastructure Ltd, airports business appears to be the only beacon of light steadily churning profits, unlike the loss-making power units, two of which are stressed assets under a debt resolution plan.
“Airports segment is a cash cow, and the demerger move is a good one. The only technical issue in that is getting no-objection for that from their partners in various ventures. As far as airport division goes, they had tried buying out some of the private equity investors and clearing the hurdle,” said a Mumbai-based fund manager.
GMR Airports, currently the world’s fourth-largest private airport operator, has set its sights to emerge as the largest globally. In all, it has six airports under its fold, including the one under construction in Goa. It operates the Delhi, Hyderabad airports and had emerged as the successful bidder last year to develop Nagpur airport.
It is also looking to monetise 10 mn sq ft of land parcel for commercial development at the Delhi airport. The Delhi airport revenues took a hit after the passenger fees were cut, and company is looking for a revision of that to a normal level once again.
Among GMR’s five businesses, three verticals, namely power, EPC and others, have been in the red, while roads business is turning in a bare-bones profit for some time.
On the other hand, airports unit is recording decent profits quarter-on-quarter, enabling the parent firm to clock operating profit. However, widening finance costs have delivered a death blow as consolidated losses continue to mount. In other words, the infrastructure major isn’t making enough money to even service its debt and it is the cash flows from the airport business that is helping the group.
Meanwhile, GMR’s consolidated net loss widened to Rs 561 crore on a sequential basis in the third quarter, but contracted over last year’s Rs 578 crore. Total income during Q3 stood at Rs 2,120 crore, down from Rs 2,276 crore the same period a year ago.
Considering the widening losses, GMR said it’s considering options like monetisation of assets, raising finances from financial institutions and strategic investors, refinancing of existing debt and other strategic initiatives to address the repayment of borrowings and debt servicing in the next 12 months and to create sustainable cash flows.