GMR Infrastructure Limited (GIL) on Wednesday announced a proposed investment of Rs 8,000 crore by Tata Group, an affiliate of Singapore's sovereign wealth fund GIC and Hong Kong-based SSG Capital Management in its airports business.
The investment will consist of Rs 1,000 crore equity infusion in GMR Airports Limited (GAL) besides Rs 7,000 crore towards purchase of GAL's equity shares from GIL and its subsidiaries.
Significantly, GIL proposes to demerge its energy, highways, urban infrastructure and transportation businesses, leading to separation of its airport business, subject to customary consents, regulatory and corporate approvals.
Among multiple strategic benefits will be: significant deleveraging at GIL, investment by marquee investors for creating a world-class portfolio of airport assets and paving the way for restructuring of the business by way of demerger.
As part of the terms, GIL will retain management control over the airports business with the investors having customary rights and board representation at GAL and its key subsidiaries.
The investors have pegged 100 per cent equity valuation for GAL at post-money valuation of Rs 18,000 crore plus earn-outs of up to Rs 4,475 crore linked to achievement of certain agreed milestones and performance metrics over next five years or so.
Thus total valuation assuming all earn-outs are successfully consummated will be Rs 22,475 crore on post-money basis.
As part of this transaction, GIL also intends to provide exit to existing private equity investors who hold 5.8 per cent equity stake in GAL. At closing, GIL and its subsidiaries will hold about 54 per cent stake in GAL, Tata 20 per cent, GIC 15 per cent, SSG 10 per cent and Employee Welfare Trust 2 per cent.
The proposed investment is subject to definitive documentation, customary regulatory approvals, lender consents and other approvals.
"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," said GIL Managing Director and CEO Grandhi Kiran Kumar.