GMR group to raise Rs 3,200 cr loan for developing Vizag Int’l Airport

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GMR group is planning to raise Rs 3,200 crore in term loan for developing Visakhapatnam International Airport at Bhogapuram in Andhra Pradesh. The total project cost is estimated at over Rs 4,700 crore and the term loan conditions envisage a construction period of three years, a one-year moratorium, and a repayment tenure of 14 years.


Besides the debt component, equity contribution from promoters for the project is pegged at about Rs 1,370 crore. The sponsor contribution requirement includes Rs 350 crore in the form of sub-debt proposed to be raised during the construction phase.


The GMR group holds the airport business under the airport holding company, GMR Airports Ltd (GAL). GAL, in turn, holds a 100 per cent stake in GMR Visakhapatnam International Airport Ltd (GVIAL), a special purpose vehicle for the project. GAL won the rights to develop and operate the Bhogapuram airport through competitive bidding and subsequently signed the concession agreement in June 2020 for a concession period of 40 years. GVIAL is implementing phase I with an annual capacity of six million passengers with an estimated cost of Rs 4,727 crore.


The promoter group has already infused Rs 105 crore and had liquidity of Rs 200 crore as on September 30, 2023. This liquidity would be partly used to meet the upfront equity requirement of 40 per cent of pure equity (about Rs 410 crore), while the balance equity requirement would be infused over a three-year construction period.


India Ratings has assigned a “BBB” rating with a stable outlook for the proposed term loans. The rating reflects GVIAL’s moderate construction risk, significant traffic growth potential in the Visakhapatnam region, the stable regulatory regime of the airport sector, and a suitable debt structure.


The rating also takes into account the modest financial profile and long-standing experience of the sponsor in the airport sector and the sponsor’s commitment to supporting the project, India Ratings said.


The debt structure also features the creation of one quarter of Debt Service Reserve within 60 days from the commercial operations date (COD) and another quarter to be created from project cash flows and sponsor support within six months from COD.


The debt terms stipulate the sponsor-infused funds in GVIAL will be unsecured and subordinated to the senior debt during the debt tenure, it added.