Global brands to be enticed to Indian airports by GMR-ADP alliance
The GMR Group is working on upgrading the retail experience at its airports worldwide by leveraging the expertise of its French partner Groupe ADP, a top company executive said.
“We want to use Groupe ADP’s expertise in design to create next-generation retail areas at airports so that the Indian consumer spends more at Indian airports rather than at hubs outside, which have cannibalized the demand from Indian consumers,” said Saurabh Chawla, executive director, finance and strategy at GMR Infrastructure. “We want to use their expertise in attracting the best of brands to GMR airports, housed in freshly designed retail areas. Imagine their negotiating power to attract global brands. Ours (relationship with ADP) is not a financial relationship. It is an industrial partnership,” Chawla said in an interview.
The Adani Group operates the largest number of airports in India after the state-run Airports Authority of India (AAI); however, GMR Group also operates airports overseas, making it India’s largest homegrown private airport operator.
The retail strategy will help GMR improve non-aeronautical revenues at airports such as Delhi, where 30% of non-aeronautical revenue is used to cross-subsidize airport charges.
The GMR Group is also looking at developing an airport management vertical to bid for master concessions (airport operations) and real estate development at various airports, Chawla said.
The group’s broader strategy is in line with that of other airport operators such as Adani Group and AAI. The Adani group has already stated its intention to develop real estate and aero cities around its airports. AAI is also prepared to sell master concessions at its airports to increase non-aeronautical revenue.
Attempting to develop its non-aeronautical business, GMR earlier won a bid for duty-free business in Bali. The partnership with Groupe ADP is expected to help the company attract top brands at competitive rates.
In 2020, Paris-based airport operator ADP purchased a 49% stake in GMR Airports Ltd, a subsidiary of GMR Airports Infrastructure Ltd, with the GMR Group holding the rest. Airports under GMR Airports Ltd include independent operating entities for Delhi, Hyderabad, Mopa in Goa, Bidar, Bhogapuram and Crete in Greece. Established in 1945, Groupe ADP owns and manages Charles de Gaulle Airport, Orly Airport and Le Bourget Airport in Paris. Overall, it controls and manages more than 20 airports, including the network of its joint ventures—TAV Airports and GMR Airports.
In March, the two partners decided to merge GMR Airports with the group holding company GMR Airports Infrastructure. Once the merger is completed by March 2024, GMR Group will remain the largest stakeholder in the listed entity GMR Airports Infrastructure with a 33.7% stake, while Groupe ADP and the public will hold 32.3% and 34%, respectively. All eight airport companies in the group will be subsidiaries of the company.
“So, the merger of GMR Airports Infrastructure Ltd and GMR Airports Ltd will create a value creation of 15-20% as the closer the operating asset is to the listed company, the higher the valuation,” Chawla said. “ADP will be christened as co-promoters, but management control will be with the GMR family. Western Europe is ADP’s region of influence and South Asia is GMR’s. In the rest of the geographies, we will collaborate, although, in Southeast Asia, GMR will take the lead position to look for opportunities. In geographies where TAV (ADP subsidiary) is present, we coordinate via ADP,” he added.
The merger will also help the company raise around ₹2,900 crore from Groupe ADP through 10-year foreign currency convertible bonds, which will be used to clear debt.
“Debt of GMR Infrastructure Ltd is around ₹2,200 crore, which includes accrued interest. Surplus of about ₹700 crore out of ₹2,900 crore along with ₹550 crore of earnout money totalling ₹1,250 crore shall be used to remove a large part of contingent liabilities,” Chawla further said.