GMR Infrastructure will give Rs 35.6 billion by way of cash and 5.86 per cent stake in its airport holding company to three private equity (PE) investors, ending two years of litigation.
The immediate cash payout works out to around Rs 15 billion, as the three investors are to give new loans of Rs 20.05 billion as part of the transaction. In 2010-11 and 2011-12, GMR Group had raised Rs 14.78 billion via compulsorily convertible preference shares from SBI Macquarie, Standard Chartered Private Equity, JM Financial Old Lane and others. The investment was made in GMR Airports (GAL), which controls the airports at Delhi and Hyderabad.
In the agreement, the PE companies were assured of an exit through an Initial Public Offer of equity (IPO) or promoter buyback. The PE investors had a right to acquire 49 per cent in GAL in an event of a default. In 2015, GMR Group exercised a call option to buy back shares held by the PE investors but this was subject to fulfillment of certain conditions and regulatory approvals.
As the latter did not come, there was a stalemate, leading to arbitration.
GMR Group announced on Monday it had got a consent award from the arbitration tribunal in Singapore, based on the settlement agreement it signed with the PE investors. It said the investors would acquire a 5.86 per cent equity of GAL, at an equity valuation of Rs 210 billion, and receive payment of Rs 35.6 billion in lieu of the preference share investment. The 5.86 per cent stake will be valued around Rs 12 billion.
It said the cash payment would be partly funded by GMR's listed arm, by selling its stake in airports in the Philippines and Delhi Airport Parking Services to GAL. These transactions will be funded through issue of non-convertible debentures to the PE investors.
“This is a significant positive development for the group. It reinforces the fundamental strengths of the airport business and paves the way for value unlocking of the airport business. This will act as a catalyst for potential deleveraging of GMR Infrastructure's balance sheet and value creation for shareholders,” stated GMR Group.
It had recently emerged as the highest bidder for the Nagpur airport privatisation project, and is expanding its footprint by securing contracts in Philippines and Greece. According to media reports, GMR is looking at raising $500 million (about Rs 36 billion) through an IPO of its airport division.