Tata Group enters airports business with a $3.2 billion restructuring deal with GMR

• The deal will result in the separation of GMR’s airports business from its other divisions.
  
• Tata Group will get a 20% stake in the airports business.
  
• An affiliate of Singapore sovereign wealth fund GIC and a special situations and turnaround-focused investment firm, SSG Capital Management, will each own a 15% and 10% stake, respectively.
  
• The deal will help GMR “substantially” pay down its debt and strengthen its balance sheet.
  

India’s GMR Infrastructure Ltd. (GIL), which operates the Indira Gandhi International Airport, has brought on the Tata Group as an investor in its airports business, in a restructuring deal valued at about ₹224.75 billion ($3.2 billion).

Tata, along with an affiliate of Singapore sovereign wealth fund GIC, and SSG Capital Management, a special situations and turnaround investment firm, have agreed to together invest ₹80 billion ($1.15 billion) in GMR Airports Ltd, according to a company statement.

GMR shares jumped almost 10% following the news of the deal.

According to the terms of the deal, Tata will get a 20% stake in the airports business, while GIC and SSG will each own a 15% and 10% stake, respectively. Its existing private equity investors who hold 5.8% stake in the company will cash out as part of the deal.

The deal will result in the separation of GMR’s airports business and “demerger” of its energy, highways, urban Infrastructure & transportation businesses. The demerger and the resulting spin out will pave the way for a “restructuring” of the business, helping GMR pay down debt, and have other “multiple strategic benefits.”

The ₹22.5 billion-deal, subject to regulatory approvals, also includes earn-outs of up to ₹4.5 billion over the next five years that will be payable by the investors based on certain performance-related milestones.

GIL plans to retain management control over the Airports Business, while the investors will have board seats.

As part of the transaction, the investors plan to pump in fresh equity of ₹10 billion into the airports business and spend ₹70 billion towards buying out shares from existing investors, according to the statement.

“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,” Grandhi Kiran Kumar, Managing Director & CEO, GIL, said in the statement.

The deal and the “large pool of capital” will help grow the GMR Airport infrastructure business, Kumar added.

GMR’s airports portfolio includes 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 Philippines.