GMR Infrastructure Ltd (GIL) announced on Monday it has settled the arbitration with its private equity investors by giving them 5.86% equity in its subsidiary GMR Airports Ltd (GAL) along with a payment of Rs 3,660 crore.
The arbitration relates to the settlement of Class A compulsorily convertible preference shares issued by GMR Airports Ltd to the private equity investors, i.e, converting the investment into equity. However, later on GAL was against it. The investors then went into arbitration.
The arbitration proceedings were administered by the Singapore International Arbitration Centre and asked both the parties were directed to settle the matter amicably.
The investors including SBI Macquarie, Standard Chartered Private Equity, JM Financial Old Lane and others had invested Rs 1,478 crore in the form of compulsorily convertible preference shares (CCPS) in GMR Airports Ltd (GAL) in the financial year (FY) 2011 and FY2012.
"Further pursuant to the settlement agreement, all parties decided to withdraw the ongoing arbitration and pursuant to binding agreements giving effect to the terms of the settlement the investors (along with certain of their affiliates) would acquire 5.86% equity of GAL at a 100% valuation of Rs 21,000 crore and receive a payment of Rs 3,560 crore in lieu of their entire CCPS," GIL said in a statement.
GMR Infra said the cash payment would be partly funded by the company through the sale of airport-related equity ownerships to its arm GMR Airports. GIL would sell its entire shareholding of 40% in CEBU airport in Philippines at a 100% valuation of $590 million, 50% shareholding in Clark EPC project in Philippines at a 100% valuation of $9.7 million and its entire shareholding of 40.1% in Delhi Airport Parking Services Ltd at a 100% valuation of Rs 499 crore.
The aforesaid shareholdings are being acquired by GAL based on valuations by Duff & Phelps. GAL would fund these acquisitions by a fresh issue of non-convertible debentures of Rs 2,005 crore subscribed by the investors and/or certain of their affiliates.
G B S Raju, chairman, Airport Sector, said in a statement, "We thank our investors for contributing to the growth of GAL as an airport operator platform growing from two airports assets at the time of their investment to current six airports assets (including Nagpur Airport, for which we have emerged as highest bidder."
A Bengaluru-based analyst said this will end the uncertainty over the arbitration result and help GMR to gain more focus in its expansion plans.
"We remain committed and bullish on the airport infrastructure business opportunities which encompass growth of consumer business and commercial property business surrounding the airport," Raju added.
GMR Group's airport portfolio comprises India's busiest Indira Gandhi International Airport in New Delhi, Hyderabad's Rajiv Gandhi International Airport, Mactan Cebu International Airport in partnership with Megawide in the Philippines. The greenfield projects under development include airport at Mopa in Goa and airport at Heraklion, Crete, Greece in partnership with GEK Terna.
The GMR-Megawide consortium has won the Clark International Airport's EPC project, the second project in the Philippines.
END OF ARBITRATION
- Rs 3,660 cr – Payment GMR Infra will make to PE investors; to be partly funded via sale of airport-related equity ownerships to its arm GAL
- Rs 2,005 cr – NCDs GAL would use to fund acquisitions of stakes from parent firm GMR Infra
- Rs 1,478 cr – PE firms had invested in the form of compulsorily convertible preference shares in GMR Airports
