GMR to raise $150 mn for its airports biz

Bangalore-based GMR Infrastructure today said it was close to raising as much as $150 million (around Rs 698 crore) in the second round of private equity investment for its airport arm, GMR Airport Holdings. Last month, it had raised $200 million (Rs 893 crore) from SBI Macquarie Infrastructure Fund.

The company is awaiting government approval for the deal. According to the current regulations, any investment of or above Rs 1,200 crore in the aviation sector needs government approval. Since SBI Macquarie’s investment was through an offshore vehicle, the new deal will breach the upper limit.

“We have signed the agreements with the investors, but that is subject to approvals,” said A Subba Rao, chief financial officer of GMR Infra. He refused to divulge the names of the private equity companies.

According to Rao, there would be no immediate equity dilution due to the investments, as it would be in the form of a compulsorily convertible structured product, that will be convertible when the unit goes public. “We cannot predict when we can come up with an IPO,” said Rao. The private equity investment by SBI Macquarie was also through compulsory convertible preference shares.

GMR Airport Holdings operates two airports in India (New Delhi and Hyderabad) and one in Turkey (the Sabiha Gokcen International Airport, Istanbul). The recent private equity investments, however, will be used to develop new projects. The airport arm accounts for as much as 46 per cent of GMR Infra’s revenues.

GMR Infra has been battling a high debt of around Rs 15,300 crore, while its airport business itself has a debt of around Rs 9,200 crore. The fresh equity infusion can reduce the company’s debt-equity ratio. The company’s borrowings are expected to rise, as it is developing a new project in Male. Airport projects, like other infrastructure projects, require high initial capital expenditure and take at least five-seven years to break even.

However, experts say the airport business is poised to grow. “Airport traffic has increased and so has project growth rate. So, it would be a good opportunity for private equity investors,” said Umesh Agarwal, head - infrastructure of PriceWaterhouseCoopers.