Debt-laden infrastructure major GVK Power & Infrastructure is planning to list its airport arm GVK Airport Developers. Hyderabad-based GVK operates airports in Mumbai and Bengaluru and plans to expand this business in Navi Mumbai, Chennai, Kolkata and Goa. A draft red herring prospectus (DRHP) for the INR3,500 crore IPO may be filed as soon as next month while listing may happen by the end of the year, reported by CNBC TV18. The report did not identify the sources for the news but added that the issue is likely to be managed by JM Financial and Citibank.
While reports to this effect have surfaced in the past, this is probably the first time when specific timelines and amount are mentioned. Proceeds from the issue will be used to reduce debt burden of the group which is currently at INR3,500 crore. The company is believed to have undertaken a restructuring to meet market regulator SEBI’s listing requirements.
From the information available so far, the issue may possibly just be an instrument for GVK to partially offload its shareholding in the airport operator and thus, it may not involve fresh issue of shares. Whatever is the structure of the IPO, a listing is likely to help the company whose stock ([stock_quote symbol=”GVKPIL” show=”” zero=”#000000″ minus=”#FF0000″ plus=”#448800″ nolink=”1″]) surged more than 10% today following the news.
If GVK goes ahead with the IPO plans, it will be the first airport operator to list in India. Given the buoyant stock markets, the timing may be just right for a listing as such debt-heavy plays can’t be expected to sail through in depressed markets.
Prospects for airport operators have also changed for good in recent years in light of favorable policy changes. The Airports Economic Regulatory Authority (AERA) said in 2010 that it would regulate tariffs only on airports’ aeronautical activities while leaving non-aeronautical operations like leasing retail space for shopping and entertainment outside of its purview. Since aeronautical tariffs are regulated, margins are low in the core business. However, operators support their margins through leveraging non-core operations like shopping.