After raising money for its power division from a clutch of PE investors like Temasek, IDFC PE, UTI Ventures and Arganaut, GMR Infrastructure is looking at raising funds for its airports division. Macquarie-SBI was in advanced negotiations with GMR Infra to invest $100 million (Rs 466 crore) in the latter’s airports division, investment banking sources told. GMR’s airport portfolio includes Delhi International Airport (P) Ltd (DIAL), GMR Hyderabad International Airport Ltd (GHIAL) and Sabiha Gokcen Airport Ltd in Istanbul, Turkey. GMR has also bid for an airport project in the Maldives. The total valuation of this division has been pegged at around Rs 13,000 crore. The transaction is expected to close within a month. GMR CFO A Subba Rao termed the development as speculation and refused to comment.
An e-mail sent to Macquarie elicited no response. It is still not clear if the investment would be similar to the power one, in terms of capital getting converted during the time of an IPO, with a guaranteed internal rate of return (IRR) of 18-25 per cent. The investment could be at a considerable premium as stock brokers said there was tremendous potential of value upside from the real estate. “They might be pitching the real estate associated with airports as part of their airports business. If you look at that, $2-2.5 billion or even $3 billion does not seem too farfetched,” said a Mumbai-based analyst. GMR has a 54 per cent stake in DIAL and is operating it on a build, operate and transfer basis. In GHIAL, it holds 63 per cent. The airport was commissioned in 2008 and has an initial capacity of 12 million passengers and 100,000 tones of cargo handling capacity a year. In 2009, the company commissioned the Rs 3,143-crore Sabiha Gokcen International Airport in Turkey, with a capacity of 20 million passengers. GMR Infra, with interests in power, roads, airports and urban infrastructure, has a market capitalization of 22,362 crore. Company sources said GMR was looking at a strategy to unlock value in its various divisions.
The company is known to have plans for getting financial investors in each of these divisions and is planning to list them in about three and a half years. The financial investors, who would exit through the IPO, have a potential 25 per cent IRR. GMR has been in the market for close to seven months, exploring ways to raise equity for its high profile division. Funds like JP Morgan, 3i and Chrys Capital had also been approached, sources said, but high valuations especially that of the real estate embedded in the project proved to be a dampener. Macquarie-SBI raised a $1billion PE fund for investment in Indian infrastructure sector a year ago. Macquarie and GMR had earlier teamed up to bid for $2-billion Singapore based Tuas Power. However, they lost to Chinese company Huaneng.
An e-mail sent to Macquarie elicited no response. It is still not clear if the investment would be similar to the power one, in terms of capital getting converted during the time of an IPO, with a guaranteed internal rate of return (IRR) of 18-25 per cent. The investment could be at a considerable premium as stock brokers said there was tremendous potential of value upside from the real estate. “They might be pitching the real estate associated with airports as part of their airports business. If you look at that, $2-2.5 billion or even $3 billion does not seem too farfetched,” said a Mumbai-based analyst. GMR has a 54 per cent stake in DIAL and is operating it on a build, operate and transfer basis. In GHIAL, it holds 63 per cent. The airport was commissioned in 2008 and has an initial capacity of 12 million passengers and 100,000 tones of cargo handling capacity a year. In 2009, the company commissioned the Rs 3,143-crore Sabiha Gokcen International Airport in Turkey, with a capacity of 20 million passengers. GMR Infra, with interests in power, roads, airports and urban infrastructure, has a market capitalization of 22,362 crore. Company sources said GMR was looking at a strategy to unlock value in its various divisions.
The company is known to have plans for getting financial investors in each of these divisions and is planning to list them in about three and a half years. The financial investors, who would exit through the IPO, have a potential 25 per cent IRR. GMR has been in the market for close to seven months, exploring ways to raise equity for its high profile division. Funds like JP Morgan, 3i and Chrys Capital had also been approached, sources said, but high valuations especially that of the real estate embedded in the project proved to be a dampener. Macquarie-SBI raised a $1billion PE fund for investment in Indian infrastructure sector a year ago. Macquarie and GMR had earlier teamed up to bid for $2-billion Singapore based Tuas Power. However, they lost to Chinese company Huaneng.
The above article was extracted from Skyline updates of Skyline College. Skyline College is amongst the top MBA and BBA institutes in Delhi, Gurgaon (NCR).
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