The GMR group, which has interests in the Airports, Power and Transport sector, is beefing up its airport business. The group’s airport business was the second-largest airport developer in the world pre-Covid, based on annual passengers. The airport business has an operational capacity of 94 million passengers right now, with almost as much capacity (85 million) under development.
The expansion by the group, whose airports business has attracted investments from French operator Groupe ADP, is being driven by the Delhi and Hyderabad airports. GMR has fully tied up financing for its capital expenditure.
This gives it a much-needed headstart against the Adani group, which, after a delay, has started taking over the airports it had won as part of the government’s latest privatisation drive. The Covid period, when traffic is lower and there is slack to expand terminals, is being utilised to ramp up capacity, and scale up businesses such as Duty Free. This is to ensure that when traffic recovers the group has both the capacity and the skill to earn revenues not only to recover the investments, but possibly make profits.
Delhi Airport, the largest in the country, is undergoing a capacity addition of 34 million passengers annually, which will take the capacity from 66 million to 100 million with a planned commissioning date of September 2023. This has required a capex of Rs 105 billion.
The works include a fourth runway and the country’s first elevated taxiway. By the end of August, 47.7 percent of the work had been completed.
Hyderabad is seeing its capacity more than double with an addition of 22 million, taking the airport from 12 million to 34 million. The work is slated to be completed by December 2022, with 63 percent of the work being done by this August. The total cost of the project is Rs 67 billion.
Goa, where the group is developing a greenfield airport at Mopa, will start with 7.7 million annual passengers and is slated to open between August to October 2022, subject to approvals. The project will cost the group Rs 26 billion and 37 percent of the work had been completed at the end of August.
Development is also progressing on the non-aero front with the land bank at Hyderabad. The group is partnering with a private entity for development of a 1.7 million square feet logistics park. In addition, 1.01 million square feet of land has been leased to Amazon. The aim is to monetise over 2,000 acres of prime real estate. The group has a vision to develop an aerotropolis at Hyderabad.
Traffic recovery and dependence on non-aero business
A lot of the plans are dependent on traffic recovery but domestic traffic has recovered to 70 percent of pre-Covid levels and the group expects to reach the pre-Covid level by FY22 for domestic and FY23 for International traffic.
The group has seen its non-aero revenues grow at a 14 percent CAGR from FY15 to FY20, with a quarter of the current revenues coming from rentals and nearly 30 percent coming in from Retail, including duty-free at the Delhi Airport. The non-aero revenue was INR 22 billion in FY20 at Delhi.
The growth has been faster at Hyderabad with a CAGR of 15.5 percent for the same period, with just the car park contributing to 20 percent of the revenues. Hyderabad airport recorded non-aero revenues of INR 3.9 billion in FY20.
Steady revenue from 3 new airports soon
By 2023, Mopa airport will be operational. Goa sees 8.5 million passengers annually. This will be followed by the airport at Bhogapuram, which will serve Vizag. The city sees nearly 3 million passengers.
With the court ordering MIHAN to hand over Nagpur airport to GMR, another 3 million passengers will be added. These airports have 232 acres, 294 acres and 247 acres of land for property development, respectively.
The group has said that it took only three months for recovery post the second wave of Covid to reach the same numbers as it did six months after the first wave, following resumption of services. The average daily domestic traffic in October stood at 76 percent of the pre-Covid levels at Delhi and 72 percent at Hyderabad.
The average daily international traffic stood at 40 percent and 46 percent. respectively, for Delhi and Hyderabad. Cargo traffic has been steady all along with traffic between 87-97 percent.
Well placed for business after Covid?
The company is in the process of a demerger of its businesses, with GMR Infrastructure Limited handling the Airport business while GMR Power and Urban Infra Limited will take over the Non-Airport business.The investment and expertise that Groupe ADP will bring to the Airport business will help the group scale up, save costs and expand profitably. It is also likely to get access to technology and skill sets at a cheaper rate.