Mumbai: The GMR Group’s promoter entity, GMR Enterprise Private Limited (GEPL), on Wednesday said it will refinance its existing debt with a ₹6,300-crore credit line from Abu Dhabi Investment Authority (ADIA).
The funding line will help GEPL consolidate all its debt under one facility and reduce its pledge on the shares of the group’s listed airport company, as per a press statement.
GEPL holds 25.4% stake in GMR Airports Ltd (GAL), the listed company that operates the Delhi and Hyderabad airports. Currently, 58.3% of the GEPL stake in GMR Airports is pledged, as per BSE data.
“GEPL has the debt on its books for some time now. There is no business with cashflows for it to service this loan, so it kept compounding, and the cost of borrowing also started going up,” said a person close to the development of the deal on condition of anonymity.
Zero-coupon loan
The structured debt facility will be a zero-coupon loan with a tenure of eight years and an interest rate between 13% and 15%, this person said. It will be backed by shares of the listed GMR Airports.
The facility will not only reduce the cost of capital for GEPL but also reduce its risk of refinancing, this person added. The promoter company’s current cost of borrowing could not be determined.
“Over recent years, we have successfully reduced a significant quantum of corporate debt,” Kiran Grandhi, corporate chairman of GMR Group, said in the abovementioned press statement. “This investment from ADIA will facilitate the repayment of all external debt at GEPL, strengthening our ability to support the continued growth of GAL.”
GEPL had a finance cost of ₹866 crore in FY24, which was higher than the ₹840 crore in FY23, as per its FY24 annual report. The company recorded a loss of ₹592 crore in fiscal 2023-24.
Indirect exposure to airports biz
For ADIA, the investment will give it indirect exposure to the lucrative airports business in India. If the borrower fails to repay at the end of the loan tenure, the investor will have the option of converting the debt into an equity stake in the company, the person cited above said without elaborating further.
“India’s aviation sector has strong growth prospects, backed by the positive long-term fundamentals of the Indian economy, while GMR Group is one of the country’s leading airport operators,” Khadem Al Remeithi, executive director of the infrastructure department at ADIA said in the press statement. “This investment aligns with our approach of backing entities which are developing world-class transport assets that benefit from demographic growth and increased economic connectivity.”
The shares of GMR Airports gained 2.21% on the BSE on Wednesday to close at ₹82.2. Comparatively, the BSE Sensex ended the session 0.17% in the red.
