March 27, 2019 / 10:30 AM / 3 months ago

UPDATE 1-GMR Infra sells $1.16 bln stake in airports arm to Tata, GIC, SSG

* GMR Infra to cut debt by 40 pct after deal

* GMR Infra to retain control with 54 pct stake

* GMR Airports to be demerged, listed

* PE investors in GMR Airports get exit option (Adds details of deal, updates shares)

By Promit Mukherjee

March 27 (Reuters) - GMR Infrastructure said bit.ly/2UbRphT a consortium of Tata Group, an affiliate of Singapore's sovereign wealth fund GIC, and SSG Capital Management will invest 80 billion rupees ($1.16 billion) in GMR Airports Ltd, which operates India's biggest airport in New Delhi.

The deal will help the company cut its debt and also provide an exit for private equity investors such as Macquarie, Standard Chartered PLC and JM Financial Ltd from the company’s airports business, it said on Wednesday.

GMR Infra’s airports business - under which it manages airports in New Delhi and south Indian city of Hyderabad - is the cash cow of the group with over two-thirds of revenue and half the profit coming from the business.

After the deal, the company’s net debt will fall to 120 billion rupees, from 200 billion rupees in December 2018, while GMR Airports’ debt will halve to 10 billion rupees.

Under the terms of the deal, GMR Infrastructure will hold a 54 percent stake in GMR Airports and keep management control, while Tatas will hold about 20 percent, GIC 15 percent and SSG nearly 10 percent.

BUSINESS RESTRUCTURING

After the deal, which will take 2-3 months to complete, the debt-laden infrastructure company will go to its board for approval to “restructure and demerge” the airports business which will lead to its listing on stock exchanges, a company executive said.

“Airport is not an infrastructure play. It is a consumer play. We want to give minority investors exposure to pure play airport business also,” said Sushil Kumar Modi, Group CFO for strategic finance.

The company plans to create two different verticals under GMR Infrastructure - one that will be formed with the demerger of airports business and the other with remaining businesses of roads, power, its coal mining assets in Indonesia and its industrial land holdings, Modi said.

“Both the verticals will operate as separate listed companies in future and help unlock value in each,” said Saurabh Chawla, Executive Director (Finance & Strategy), GMR Infrastructure.

Over the next few years, the New Delhi-headquartered company will also look at monetising the road assets, industrial land and the coal mines.

The demerger and restructuring of the company depends on getting requisite board approvals, which will be sought “very soon”, Modi said.

Private equity investors in GMR Airports that had long been looking to cash out will now have a chance to exit the business in less than 12 months.

GMR Infrastructure said it would start talks with the investors “very soon”.

Shares of GMR Infrastructure climbed 9.8 percent to touch a near 7-month high on news of the deal. They gave up most of the gains to end 0.3 percent higher in a Mumbai market that lost 0.3 percent. ($1 = 68.8800 Indian rupees) (Reporting by Promit Mukherjee in Mumbai and Chandini Monnappa in Bengaluru; Additional reporting by and Chris Thomas; Editing by Shreejay Sinha)

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