1
Evaluation of GMR Hyderabad International Airport Limited (GHIAL)
Evaluation of GMR Hyderabad InternationalAirportLimited (GHIAL)
GMR Group is one of the global infrastructure majors headquartered in Bangalore, India. Its
major business segments include Energy, Highways, Urban Infrastructure (also includes the projects
in Special Economic Zones (SEZ)), Agri-business and recently, in 1999, the company forayed into
the airports sector as well.3 With its entry into the Airports sector, it has launched itself as a forerunner
in the core infrastructure areas of India.4 In a competitive bidding process conducted by the
Government of Andhra Pradesh (India), it won the bid to construct GMR Hyderabad International
Airport (GHIAL) which was the Group’s first project.
“The experience at the new airport will slowly convince the people that they are enjoying world-class
facilities.”1
– Kiran Kumar Grandhi, Managing Director, GHIAL
“This is the beginning of new chapter. India’s truly first world-class airport will be commencing
operation in the month of March.”2
– Praful Patel, Union Civil Aviation Minister, India
This case study was written by Swapna Pragada (Research Associate) and Dr. Lokanandha Reddy Irala, IBS, Hyderabad. It is intended
to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.
The case was compiled from published sources.
© 2009, IBSCDC.
No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever
without the permission of the copyright owner.
Ref. No.: FM0017
1 Kurmanath K.V., “The making of country’s first private greenfield airport”, http://www.blonnet.com/2008/03/15/stories/
2008031551320700.htm, March 15 th 2008
2 “India’s first greenfield airport in Hyderabad ready for operation”, http://www.thaindian.com/newsportal/india-news/indias-
first-greenfield-airport-in-hyderabad-ready-for-operation_10017335.html, February 13 th 2008
3 Chowdhury Anirban, “GMR: From commuting on a cycle to building global airports”, http://www.rediff.com/money/2007/jul/
13spec.htm, July 13th 2007
4 “Corporate: Projects”, http://www.gmrgroup.co.in/branchindex.aspx?branchid=5
Evaluation of GMR Hyderabad International Airport Limited (GHIAL)
2
GMR Hyderabad InternationalAirport Limited (GHIAL):ASubsidiary of GMRGroup
GMR Group won the competitive bidding process for the development of Greenfield International
Airport at Shamshabad in Hyderabad, India conducted by the Government of Andhra Pradesh and
the Government of India in the year 2003 (Annexure I).5 Thus, GHIAL started as a public-private
partnership between the public participants – the State Government of Andhra Pradesh and Airports
Authority of India (AAI) – and the private players – GMR Group and Malaysia Airports Holdings
Berhad (MAHB). In the project, GMR and MAHB had stakes of 63% and 11% respectively whereas
the Government of Andhra Pradesh and Airports Authority of India had a share of 13% each.6 The
project has an initial license period of 30 years and GHIAL has the choice to extend the period to 30
more years.
GMR designed GHIAL to meet international standards in terms of provision of facilities and
services. It was initially designed for a passenger capacity of 7 million passengers per annum (mppa).
However, in the year 2005, the passenger handling capacity of the airport was altered due to 40%
increase in the air-traffic.7 After modifications in the scope of the project, the airport’s capacity was
increased to an extent of handling 12 mppa and 100,000 tonnes of cargo per annum. The revised
project plan also included the construction of a fuel farm and a 308-room 4-star business hotel in the
airport. The revamping of the capacity and the construction of the additional facilities increased the
estimation of the project from INR 17,600 million to INR 24,780 million.8
The project was funded in the debt-equity ratio of 4:1. The airport construction was funded by
Abu Dhabi Commercial Bank, Andhra Bank and Vijaya Bank. The equity share also included a
grant of INR 1,070 million from the Government of Andhra Pradesh.9 For the development of
additional facilities, a debt of INR 2,000 million ($50 million) and External Commercial Borrowing
(ECB) of INR 5,180 million ($128.6 million) were raised by GHIAL.10 The debt raised through ECB
has a repayment time lag of 2 years from the date of commencement of the airport operations and
the repayment schedule is spread over 14 years.
It planned to boost up its revenues from the airport by concentrating on non-aerospace business
as well.According to T Srinagesh, chief operating officer, GHIAL, “Non-aero business will initially
account for about 50% of the total revenues, but would eventually go up to as much as 75%.”11
Also, in order to entice manufacturers of high-end products like computer chips, electronics, gems
5 “Rajiv Gandhi (Hyderabad) International Airport, Andhra Pradesh, India”, http://www.airport-technology.com/projects/
hypderbadIndia/
6 “Public Private Partnership”, http://www.hyderabad.aero/airport/partnership.html
7 “GMR Infrastructure Limited 11 th Annual Report 2006–2007”, http://www.gmrgroup.co.in/Investors/pdf/
GIL11thAnnualReport2006-07.pdf, page 37
8 Ibid.
9 Ibid.
10 “Rajiv Gandhi (Hyderabad) International Airport, Andhra Pradesh, India”, op.cit.
11 “GMR now eyes non-aero business”, http://www.financialexpress.com/news/gmr-now-eyes-nonaero-business/161745/, March
30th 2006
3
Evaluation of GMR Hyderabad International Airport Limited (GHIAL)
and jewellery, it also planned to set up budget hotels and an airport-based SEZ. All these plans
increased the attractiveness of the GHIAL project and the revenues it would generate after the
completion of the project.
In December 2008, the project of GHIAL was evaluated by J. P. Morgan and it presented the
estimated cash flows of GHIAL in one of its report (Annexure II). It also estimated the appropriate
discount rate (weighted average cost of capital) as 9%.12 The prospects of the project in the long
run are yet to be seen.
12 “GMR Infrastructure Ltd.”, http://0301.netclime.net/1_5/145/0b8/1a8/GMR%20Infrastructure%20-
%20J%20P%20Morgan%20-%20Dec%209,%202008.pdf, December 9 th 2008, page 3
Evaluation of GMR Hyderabad International Airport Limited (GHIAL)
4
Annexure ISpecifications of GMR Hyderabad International Airport (GHIAL)
Key Data
Start Year 2003
Project Type Greenfield airport
Location Hyderabad, India
Estimated Investment INR 24,780 million
Completion Opened March 23rd 2008, first plane landed as a test on
February 12th 2008
Key Players
Sponsor GMR-Hyderabad International Airport Limited (GHIAL),
GMR Group (63%), MalaysiaAirports Holding Berhad (11%),
Government of Andhra Pradesh (13%), Airports Authority of
India (13%)
Financing Abu Dhabi Commercial Bank, Andhra Bank, Vijaya Bank
Contractors Larsen & Toubro, China State Construction & Engineering
(Hong Kong), Menzies Aviation Plc, LSG Sky Chef and Sky
Gourmet, Reliance Industries (RIL), Novotel, Accor Group,
Nuance-Shopper’s Stop Consortium, Plaza Premium Lounge,
MunichAirport Int.
Navigation VOR, NDB, VOR DME, ILS (CAT I on both ends)
Traffic
Passengers per Year 12million
Featured Suppliers
UFIS Airport Solutions - Integrated Solutions for Airport Operation and Management
Source: “Rajiv Gandhi (Hyderabad) International Airport, Andhra Pradesh, India”, http://www.airport-technology.com/
projects/hypderbadIndia/specs.html
5
Evaluation of GMR Hyderabad International Airport Limited (GHIAL)
Annexure IIEstimated Cash Flows of GHIAL (in INR million), Financial Year (FY)
2009–2012
2009 2010 2011 2012
Passengers (in million) 5.9 6.4 7.3 7.6
Aero revenue 1,432 2,117 2,445 2,515
Non-aero revenue 1,286 1,594 2,091 2,687
Total gross revenues 2,718 3,711 4,536 5,202
Less: AAI revenue share 116 161 197 224
Net revenue 2,602 3,550 4,339 4,978
Net revenue/passengers(in million) 441.0 554.7 594.4 655.0
EBITDA margin (%) 69 75 76 74
EBITDA 1,793 2,655 3,309 3,706
Depreciation 1,416 1,507 1,587 1,977
Interest 1,716 1,804 1,447 1,984
PBT -1,339 -656 275 -255
Tax 0 0 -26 0
PAT -1,339 -656 301 -255
Government grant 1,070 1,070 1,070 1,070
Operating cash flow 1,793 2,655 3,335 3,706
Free cash flow 2,863 3,725 4,405 4,776
Compiled by the author from “GMR Infrastructure Ltd”, http://0301.netclime.net/1_5/145/0b8/1a8/
GMR%20Infrastructure%20-%20J%20P%20Morgan%20-%20Dec%209,%202008.pdf, December 9th 2008, page 3
Copyright of IBSCDC Case Studies is the property of IBSCDC and its content may not be copied or emailed to
multiple sites or posted to a listserv without the copyright holder's express written permission. However, users
may print, download, or email articles for individual use.
Top Related