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Tata Group restructures GMR deal to meet regulatory norms

A 15% holding for the Tatas would keep its effective stake in Delhi International Airport Ltd, the GAL unit that runs the airport in the national capital, below 10%. Tata, GIC & SSG Capital Management have agreed to invest Rs 8,500 crore in GAL.

, ET Bureau|
Oct 30, 2019, 07.02 AM IST
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The AAI had opposed the deal, saying that it would provide a “backdoor entry” for companies into the sector with airline ownership.
NEW DELHI: The Tata Group has agreed to reduce the stake it had proposed to acquire in GMR Airports (GAL) to about 15% from the previously announced 20%, which will likely allow the GMR Group-Tata deal to sail through, people with knowledge of the plan said.

The move is to comply with a rule that bars groups that own airlines to also hold more than 10% in an airport operator. A 15% holding for the Tata Group would keep its effective stake in Delhi International Airport Ltd (DIAL), the GAL unit that runs the airport in the national capital, below 10%.

The Tata Group, which holds a 51% stake in two airlines — AirAsia India and Vistara — is part of a consortium comprising also an affiliate of Singapore sovereign wealth fund GIC and Hong Kong-based SSG Capital Management that had agreed to invest Rs 8,500 crore in GAL.

Under the new formula, GIC will acquire an additional 5% stake in GMR Airports to the previously planned 15%, while SSG will hold about 10%, the people said. GMR Infrastructure’s stake in GAL, which also operates the Hyderabad airport, will come down to about 54% from almost 100%, while an employee welfare trust will hold about 2%.

The deal values GMR Airports at Rs 18,000 crore, almost double of the Rs 9,605 crore value for GVK Airports based on investments made by a clutch of investors. GVK Airports operates the Mumbai airport and is also the developer for the proposed Navi Mumbai airport.

The new proposal has been submitted to the Airports Authority of India, which had opposed the deal citing the rule that barred companies with airline holdings, the people said.

“The new holding structure has been finalised within the investors and been sent to AAI for approval, which has to give its goahead for the deal,” said one of them.

“We decline to comment,” the Tata Group said in an emailed response to ET’s questions. The GMR Group did not respond till press time Tuesday to an email seeking comment.

The AAI had opposed the deal, saying that it would provide a “backdoor entry” for companies into the sector with airline ownership.

“During the award, this (cap on stake) was one of the conditions and companies with crossholding in airlines could not bid for the airport projects. If it is allowed now, it would set a bad precedent for cash-rich groups with airline ownership to enter the airport sector,” said a senior AAI official, who did not want to be named.

For the GMR Group, clearance of this deal would provide funds to reduce debt. GMR had said it would use a large part of the proposed proceeds to bring down its debt to Rs 13,000 crore from over Rs 19,000 crore.c

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