A consortium of Tata Group, a unit of Singapore’s sovereign wealth fund GICNSE 6.60 % and SSG Capital Management will invest Rs 8,000 crore ($1.2 billion) to buy a stake in GMR Airports Ltd, which runs India’s biggest airport.
The deal will pump Rs 1,000 crore into GMR Airports, a unit of GMR InfrastructureNSE 2.57 % Ltd. and purchase Rs 7,000 crore of the airport unit’s equity shares from the parent, according to a statement. GMR operates Delhi International Airport Ltd., Asia’s sixth biggest.
After the purchase, Tata will hold 20 percent in the airport unit, while GIC will get 15 percent and SSG will own 10 percent, the company said in a filing. The deal values GMR Airports at 180 billion rupees.
The deal marks Tata’s entry into the airports business amid a Rs 1 lakh crore plan by Prime Minister Narendra Modi to develop airfields in India’s remote towns and villages. Tata, which owns two local airlines, follows billionaire Gautam Adani’s bet on the sector after his firm won bids to operate six local airports last month.
GMR Infrastructure, which has net debt of $2.9 billion at the end of December 2018, has been selling assets to pay off liabilities. GMR competes with GVK Power & Infrastructure Ltd., which runs the airport in the financial capital of Mumbai.
GMR shares jumped as much as 9.8 percent to the highest intraday level since Sept. 3 in Mumbai, while the broader S&P BSE Sensex index rose 0.6 percent. GMR Also operates airports in Hyderabad and Cebu, while it is developing greenfield airports in Goa and Crete, Greece.
This will mark the second corporate behemoth’s entry into India’s airport sector this year. Recently, the AdaniNSE 0.42 % Group won bids to operate five airports owned by the state-run Airports Authority of India across the country. Private airports in India have largely been a duopoly betweeb GMR and its rival GVK Power and Infra that runs that Mumbai airport and has the mandate for the second airport in the city, India’s costliest airport project. Fairfax Holdings of Canada born Indian billionaire Prem Watsa runs the airport in Bengaluru having bought it from GVK. The Tata group runs two airlines in India—Vistara and AirAsia India—in partnership with Singapore Airlines and AirAsia Berhad, a Malaysian low fare carrier.
The Tata-GIC-SSG trio beat Japanese diversified conglomerate Mitsubishi—the other entity GMR had been in advanced talks with—to clinch the deal. The money raised will primarily be used to retire part of its Rs 20,000 crore of net debt.
ET had first reported GMR’s talks with GIC and Mitsubishi on Feb 19. Queries to GMR and GIC remained unanswered. A Tata Sons spokesperson declined comment.
he Tatas have been trying to get into the airports sector. They have in the past tied up with Ferrovial to bid for projects such as the Navi Mumbai airport.