GMR Airports , a key player in India's aviation infrastructure sector, recently faced a setback in its efforts to raise funds through a mutual fund bond tranche. The company's attempt to secure ₹1,500 crore through this channel fell short, with bids amounting to only ₹950 crore, despite offering an attractive yield of 10.35% for an 18-month tenure.

Investor Response and Morgan Stanley's Intervention

The bond issue saw limited investor interest, prompting global financial services firm Morgan Stanley to intervene and cover the shortfall. The breakdown of investments in the mutual fund tranche was as follows:

Contrasting Success in Bank Tranche

In contrast to the mutual fund tranche, GMR Airports' bank tranche of ₹4,400 crore, offering a 10.50% yield for a three-year maturity, was fully subscribed. Notable investments in this tranche included:

• Deutsche Bank: ₹1,500 crore
• SBI Mutual Fund: ₹1,050 crore

Factors Affecting Mutual Fund Interest

The subdued interest from mutual funds in the bond issue can be attributed to several factors:

1. Restricted investor base
2. Migration of this segment to Alternative Investment Funds (AIFs)
3. Shift towards private credit funds

Expected Impact on Borrowing Costs

Despite the challenges faced in the mutual fund tranche, the overall fundraising effort is expected to yield positive results for GMR Airports. The company anticipates a reduction in its average borrowing cost by nearly 3 percentage points, which could significantly improve its financial position.

Credit Rating

Crisil, a leading credit rating agency in India, has assigned an A+ rating to the newly-issued Non-Convertible Debentures (NCDs). This rating suggests a strong degree of safety regarding timely servicing of financial obligations and very low credit risk.

Conclusion

While GMR Airports faced some hurdles in its recent bond issuance, particularly in the mutual fund tranche, the company has managed to secure significant funding. The successful bank tranche and the expected reduction in borrowing costs indicate that GMR Airports continues to maintain investor confidence, despite the challenges in the mutual fund segment. The company's ability to attract investments from major financial institutions and the positive credit rating from Crisil underscore its strong position in the aviation infrastructure sector.

GMR Airports Limited , a key player in the aviation infrastructure sector, has achieved a significant milestone in its expansion plans. The company has been awarded a contract to develop and operate the Cargo City at Indira Gandhi International Airport in New Delhi, marking a major step in enhancing India's air cargo capabilities.

Project Details

The project, awarded by Delhi International Airport Limited (DIAL), involves the development of state-of-the-art cargo and logistics facilities spanning 50.5 acres within the Indira Gandhi International Airport. This includes:

• A primary development area for immediate use
• An additional 10-acre optional land parcel for future expansion

Contract Terms

The contract comes with favorable terms that position GMR Airports for long-term growth in the air cargo sector:

• Initial Period: The agreement runs until 2036
• Extension Option: Possibility of a 30-year extension beyond the initial period
• Revenue Model: Based on a revenue-sharing arrangement with DIAL
• Minimum Monthly Guarantee: Rs. 415.74 crores payable to DIAL for the initial period

Strategic Implications

This award represents a significant opportunity for GMR Airports to strengthen its position in the air cargo market. The development of the Cargo City is expected to enhance the efficiency of cargo operations at one of India's busiest international airports, potentially leading to increased trade facilitation and economic growth.

Regulatory Compliance

GMR Airports has emphasized its commitment to regulatory compliance in this transaction:

• The deal is structured as a related party transaction on an arm's length basis
• Necessary approvals have been obtained in accordance with SEBI Listing Regulations and the Companies Act, 2013

Company's Financial Moves

In a separate but noteworthy development, GMR Airports has also made strategic financial moves to strengthen its balance sheet. The company recently allotted Non-Convertible Bonds (NCBs) worth Rs. 590.00 crores. Key details of this allotment include:

This financial restructuring, coupled with the new Cargo City project, underscores GMR Airports' focus on both operational expansion and financial optimization.

The development of the Cargo City at Delhi International Airport, along with the company's recent financial maneuvers, positions GMR Airports for potential growth in the aviation infrastructure sector. As the project unfolds, it will be interesting to observe its impact on India's air cargo capabilities and GMR Airports' market position.