GMR to consolidate airport assets

GMR Infrastructure Ltd (GIL) will consolidate its airport assets under a holding company in the next two months, just the way it had done with its power and road assets.
GMR runs three airport projects — Hyderabad and Delhi airports in India, and another in Istanbul, Turkey.

“The holding company structure will afford better management of airport-related activities and also helps raise funds for expansion,” GMR Infrastructure CFO Subba Rao told DNA Money.

Airport is the second biggest vertical for the company after energy.

In the second quarter ended September 2009, the energy segment contributed about Rs 539.50 crore to revenues, while airports contributed about Rs 346.40 crore.
While the EPC unit and others brought in Rs 220.93 crore, roads contributed about Rs 87.46 crore.

GMR’s total revenue in the quarter was Rs 1,194.29 crore, up 41% per cent over same period last year.

Monetisation push
GMR is already working on the monetisation of airport assets.

GMR Hyderabad Airport Ltd (GHIAL), which operates the Rajiv Gandhi International Airport Ltd in Charminar city, has about 5,500 acres at its disposal and the quantum of land that would be monetised is said to be significant compared with New Delhi.

Delhi International Airport Ltd (DIAL) has about 250 acres for commercial activity.
Of this, about 45 acres have already been taken up for monetisation.

The company is giving out parcels of land to private developers for creating commercial assets and the company is expected to raise about Rs 920 crore in the form of deposits from these private developers.

The Delhi airport is being modernised by GMR with an outlay of Rs 10,250 crore. While about Rs 2,500 crore is the equity component, the rest is being raised through debt and deposits from the companies seeking land at the airport for commercial activity.

As part of monetisation strategy, GMR has also secured an exemption to develop commercial and retail activities as well at the airport instead of just the aviation-related activities.

This is expected to create significant demand for the land at the airport.

Three ‘ports’ & a school in Hyderabad
For Hyderabad, GMR is still working on the monetisation strategy.

Though an international hospital will be the next to come up at the airport in addition to a hotel, which is already operational, the company is planning to develop three “ports” at the airport.

These three ports, which are still on the drawing board, would include a medi port for health services and a fun port for entertainment. The company is also setting up a school in the premises.

GMR is also working on increasing tariffs it would collect at the airport from various users. In Hyderabad, GHIAL is allowed to collect user development fee from passengers.
While it collects about Rs 375 from domestic outbound passengers, it is about Rs 1,000 from international passengers.

The company was engaged in a tussle with the authorities on paying out service tax on these collections.

To pay service tax on UDF
Regulations impose a 10.3% service tax on the collections. The company contended that the UDF was not being collected against any service offered and it was not required to pay the tax.

However, GMR officials said they have agreed to pay service tax on the collections and it had paid out Rs 12.45 crore towards the arrears in 2008-09 and Rs 3.74 crore towards the tax for the first quarter of the current financial year.

“We intend to pass it on to the passengers. However, since there is a regulator in place now, we would wait for the orders from the regulator on revising the UDF,” Subba Rao said.

In fact, GMR has been working on revising the tariffs particularly in the wake of the drop in passenger traffic due to the recession.

It has appointed a consultant to work on the tariff revision. The consultant is expected to give a report by March 2010 and GMR would make a presentation to the regulator only after the consultant’s report.

“We are yet get clarity on charging service tax over and above the allowed UDF. If the regulator says tax is part of the UDF, then we have to follow the order,” Subba Rao said.