Jitendra Kumar Gupta Moneycontrol Research
GMR Infrastructure and GVK Power, both debt-trapped infastructure firms, got some breathing space as the Supreme Court recently extended benefits of the liberalised airport land monetisation policy to the existing developers as well.
Last year, the government unveiled the National Civil Aviation Policy 2016, which allowed the utilisation of airport land for non-aeronautical use, thereby making it attractive for new developers. However, existing players like GMR and GVK were considered to be out of the purview of this policy. This was challenged by the players and Supreme Court recently ruled in favour of the existing players.
GMR: A big asset play
Among the companies in this space, GMR has got the largest land holding and this ruling comes as a big respite in light of the urgent need to reduce its debt and improve cash flows.
GMR, which generates close to 60 percent of revenues and almost 100 percent of its profits from the airport business, has got three operational airport projects and two under-development projects.
The largest of the lot is the Delhi Airport where GMR holds 64 percent stake and has got close to 230 acres of land. It has already started commercial developments of this land with 45 acres completed and another 23 acre being awarded for development.
Similarly, at the Hyderabad Airport which holds close to 1,500 acres of land, only 90 acres has been used for commercial development.
GVK Power Infrastructures
GVK had earlier sold its residual stake in Bangalore International Airport to reduce debt and focus on the airport asset in Mumbai. GVK holds close to 50.5 percent stake in Mumbai Airport and the company has got about 200 acres of land. It has already started working on real estate development. Compared to GMR, GVK has got a smaller parcel of land and thus the positive impact of this ruling is going to be relatively less.
Improve liquidity
Both GVK and GMR have been looking to monetise assets to reduce debt. GMR has already monetised some of its hard assets like road, power and others and has reduced its debt to about Rs 20,000 crore as against Rs 37,500 crore a year back. Initiatives like monetisation of land at the prime location could unlock huge value over a period of time.
However, the benefits will accrue gradually and is contingent on the timing of such development and structure of the deal. Nevertheless, the ruling is a big positive for existing airport developers, particularly GMR, as this could resolve some of their liquidity and credit quality issues.
GMR clearly is a bigger beneficiary as it has got the highest land parcel at two of its airports and one in Goa which is under development. GMR’s three airports put together have land parcel of close to 1,962 acres, of which only about 160 acres have been monetised or are under the process of being monetised and the rest still remains to be utilised.
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