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Tatas enter airports business, to invest in GMR unit

Livemint:  March 27, 2019

New Delhi: The Tata group has made its first investment in India's burgeoning airports sector by buying 20% stake in the GMR group's airports vertical. On Wednesday morning, GMR Infrastructure Limited (GIL) announced that it has raised «¤??8,000 crore from three investors in its airport vertical, GMR Airports Limited (GAL). In an exchange filing, the company said that the proposed investment is by Tata Group, an affiliate of Singapore’s sovereign wealth fund GIC and SSG Capital Management.

GIL has signed a binding term sheet with the investors, stating that the investment amount of Rs. 8,000 crore will consist of «¤??1,000 crore equity infusion in GAL and Rs. 7,000 crore towards purchase of GAL’s equity shares from the parent company and its subsidiaries.

The proposed investment is subject to definitive documentation, customary regulatory approvals, lender consents and other approvals. Following the investment, GIL proposes to demerge its energy, highways, urban infrastructure and transportation businesses, leading to separation of its airport business, subject to customary consents, regulatory & corporate approvals.

The statement from GMR said the investment brings multiple strategic benefits such a significant deleveraging at the parent company and will pave the way for restructuring of the business by way of demerger.

As part of the terms of the proposed investment, GIL will retain management control over the airports business with the investors having customary rights and board representation at GAL and its key subsidiaries. GAL's Post Money Valuation is pegged at «¤??18,000 crore while also allowing for earn-outs of up to «¤??4,475 crore linked to achievement of certain agreed milestones and performance metrics over next five years.

As part of this transaction, GIL also intends to provide exit to existing private equity investors who hold 5.8% equity stake in GAL.

At closing of the deal, GIL and its subsidiaries will hold 54% stake in GAL, Employee Welfare Trust will hold 2%, Tata will hold 20% stake, GIC will hold 15% stake and SSG will hold 10% stake.

In the statement, Grandhi Kiran Kumar, MD & CEO, GIL, said: "The proposed investment endorses the strength of the unparalleled airport platform created by GMR Group and

will reduce our debt substantially, strengthening our balance sheet. This proposed investment by marquee investors like Tata, GIC and SSG reaffirms the significant and long-term investment

opportunity in the fast growing airport infrastructure space with a large pool of capital that can be tapped to grow GMR airport infrastructure business."

In October, Mint reported that GMR Infrastructure has agreed to pay «¤??3,560 crore to SBI Macquarie, StanChart PE, JM Financial Old Lane and others in lieu of their entire holding of compulsorily convertible preference shares (CCPSs) in GMR Airports. It had settled an ongoing arbitration with the private equity (PE) investors in its airport business in lieu of their entire holding of compulsorily convertible preference shares in GAL. In addition, the PE investors also acquired a 5.86% stake in the airport business valuing GAL at «¤??21,000 crore.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.