New Delhi: A conglomerate of Tata Group, an associate of Singapore’s sovereign wealth fund GIC and Hong Kong-based SSG Capital Management, will be investing Rs 8,000 crore ($1.2 billion) for buying stakes in GMR Airports that runs India’s biggest airport, the Delhi Indira Gandhi International Airport's Terminal 3 besides a few other airports.  

At the end of the deal, Tata group will hold a 20% share in the airport unit, GIC holding will own 15% while SSG will have 10% share, according to the company. 
Tata group entered into the airports business during the Rs 1 lakh crore plan made by Prime Minister Narendra Modi to develop airfields in India’s remote towns and villages. 

GMR operates Delhi International Airport Ltd. (DIAL), Asia’s sixth-biggest airport. GMR Airports, a unit of GMR Infrastructure Ltd. will get Rs 1,000 crore, and will also purchase Rs 7,000 crore worth of the airport unit’s equity shares from the parent company according to sources. GMR Infrastructure had a net debt of $2.9 billion, and by the end of December 2018, they were selling assets to pay off liabilities. The competitor of GMR, GVK Power & Infrastructure Ltd., runs the airport at Mumbai. 

The share of GMR increased at the rate of 9.8% to the highest intraday level since 3rd Sept. 2018, in Mumbai, while the broader S&P BSE Sensex index rose to 0.6%. The passenger capacity of the GMR Group through airports has a range of 159 million passengers, which include the Indira Gandhi International Airport in New Delhi, Hyderabad’s Rajiv Gandhi International Airport, and the Mactan Cebu International Airport in partnership with Megawide in the Philippines.  It has also got the necessary approval for developing airports at Nagpur, Goa, and Bhogapuram near Visakhapatnam.

Tata's entry will mark a second corporate entry into India’s airport sector this year. In the recent past, Adani Group won bids to operate five airports owned by the state-run Airports Authority of India all over the country. Private airports in India have been mainly operated by GMR and GVK Power and Infrastructure Ltd. It has got the nod for a second airport in Mumbai and could be the costliest airport project in India. 

GMR has also been exchanging views with Japanese multinational company Mitsubishi; however, Tata Group, Singapore’s GIC and Hong Kong-based SSG Capital Management got the deal over Mitsubishi.  The money raised will be used mainly to meet up part of GMR's Rs 20,000 crore net debt. 

The deal is to be secured within three months.  As part of the transaction, the process will initiate for providing an exit to existing private equity investors, Macquarie, SBI Infrastructure Investments Ltd, Standard Chartered Private Equity (Mauritius) III Ltd and JM Financial Old Lane India Corporate Opportunities Fund Ltd, that currently hold 5.8 per cent stake in the airports business.
GMR Airports’ post-money equity valuation is at Rs 18,000 crores by the investors.  The deal includes earn-out payments of up to Rs 4,475 crore in addition to which are linked performance indicators and to the achievement of specific indicators and performances which would be given in the next five years.
The estimated outcome of the total valuation may reach Rs 22,475 crores on a post-money basis.  GMR is separating its highways, urban infrastructure and transportation businesses, leading to the demerger of its business in the airport sector.  Shares of the New Delhi-based GMR Infrastructure rose 4.11 per cent in early trade in the BSE index Sensex. 

The profit before tax of GMR’s airports business was Rs 365 crores for the December 2018 quarter, compared to a profit of Rs 353 crore in the previous year. However, the final approval of the bids is yet to be concluded. So, all these years the private airports in the country have been a duopoly between GMR and GVK Group.
The airport in Bengaluru is run by Prem Watsa’s Fairfax Holding which has purchased it from GVK Group.  The Tata Group runs two airlines in the country — Vistara and AirAsia India, in partnership with Singapore Airlines and Malaysian airlines AirAsia Berhad. According to the MD and CEO of GMR Infrastructure Ltd. Grandhi Kiran Kumar, the proposed investment endorses the strength of the unparalleled airport platform created by the GMR group and will reduce its debt substantially, strengthening its balance sheet.