GMR AIRPORTS LIMITED analyst Q&A

Our first question is from the line of Mohit Kumar from ICICI Securities.

My question is, given the merger has, I think, materialized in this Q2. What is the total number of shares after the issuance to Groupe ADP? And am I supposed to conclude that, the OCRPS and FCCB, everything has been issued to the Groupe ADP. Is that a fair understanding?

No, I think there is some misunderstanding. The FCCBs that were issued to ADP, a little more one year back, they continue to be FCCBs. So those have not been converted by ADP. They will continue for a period of 5 years from the date of issuance, minimum pe riod of 5 years from the date of issuance. So there's no conversion from that aspect. And hence, the equity stack will not change.

So the number of shares outstanding should be around 10 billion -- 10.5 billion shares, right? And there is a 2.6 billion of OCRP. Is my number correct?

Correct.

Understood, sir. My second question is on - you received TDSAT order a few months back. Is the order still being contested? Or has it reached a finality?

With regard to Delhi TDSAT orders?

Yes.

No, the appeal has already been filed before the Supreme Court by the stakeholders. But the court has not given any stay on it. So that hearing is yet to take place.

And what are your expectation when you will receive the Delhi tariff order?

Delhi tariff order, we have filed application, including the TDSAT benefits and also the Supreme Court benefit. Both together, we have already filed application.

My question is when do you expect the Delhi tariff order to be in effect.

SBI caps has already been appointed for this purpose by the regulator. The work is going on in full swing. Regulator has already asked SBI to complete the entire work within 6 months. So we're expecting the order latest by December, otherwise, the last quarter.

So the order will be effective from 1st April 2024, while order will come in the last quarter of our FY25. Sorry.

The next question is from the line of Karthik Chellappa from Indus Capital Advisors Limited.

I just have two questions. One on Delhi Airport and one on Hyderabad. On Delhi, if I were to look at our financials this quarter, so we have about a 7% passenger growth against which we've had are about 9% to 10% non -aero growth and a 4% EBITDA growth. I' m just curious to see that our non - aero revenue per pax is probably trending at about 2% to 3%, and our EBITDA per pax is actually down year-on-year. What would explain this weakness? And when do you think we can start to see some nonlinearity in this growth where your EBITDA is actually growing faster than revenue? That's my first question, sir.

Okay. The aero part of it is clear to me, sir. When I look at the non-aero revenue, that on a per pax basis is rising only 2% to 3%. And that, I think, is also contributing some to the slow EBITDA growth. So I'm just trying to see when the non-aero revenue per pax can grow faster and which can probably translate into faster EBITDA growth. That's basically the angle where I'm coming.

Yes. I think when you look at the non-aero per pax revenue, what it takes into consideration is the inflationary impact as well as improved spend. So it can vary anything between 3% upwards also. When you really look at this particular quarter's number, i t will have a combination of few things. Q1 is not the best quarter. Q4 is a quarter where you have the maximum revenue coming in both from the aero as well as non -aero point of view. And there could be another contributing factors like spending duty free and all that. But in isolation, if you look at 3% growth in non-aero spend per pax is not a bad number. I would like to say. But yes, we have been doing better than that. And that's the endeavour to by increased offerings and increased space, you should see increasingly this spend should go up.

Yes. So I think you need to take into account the seasonality. The first quarter of a fiscal year, which is your April to June, is usually lower than the last quarter of Q4 of the previous fiscal year. So the momentum continues to be there. I think the real measure of it will be, as we go forward, you will see the trend lines reappear on the growth of the non-aero side.

And another point is that terminal 1, which is now built for 40 million capacity, is getting opened up now, then you will see a real increase in non -aeronautical revenue, maybe in third quarter and fourth quarter.

Okay. Got it. My second question is again on Hyderabad. What I noticed is that we've had a very strong aero revenue as well as non-aero revenue. So on a per pax basis, that is also -- for aero, it is almost up double digit. And for non-aero, it's up about 7% odd on a per pax basis. But despite that, the EBITDA is actually slower, which means the OpEx is actually pretty high. So what is contributing to the high OpEx to Hyderabad? And when do you think you can actually start to see EBITDA growth also in the region of our revenue growth.

See, in case of the Hyderabad, since the expanded terminal is almost 3x bigger than the existing terminal. The costs are now started being incurred. And as far as the revenues are concerned, aeronautical is, of course, in line with the tariffs which are a lready in place. Non-aeronautical revenue all the new shops are getting opened up. We are expecting the entire work will be completed by only third quarter of this financial year. You will able to see a good jump in the non - aeronautical revenue only in the fourth quarter.

There is no maintenance capex. The entire fall en canopy has already been removed. And that structure has been in place -- and Saurabh has already explained that we are starting the operations on 16th night with SpiceJet. The entire operation of SpiceJet will be operated from Terminal 1 from 17th August onwards. And Indigo is moving on 2nd or 3rd September to the Terminal 1. So it will be working with the same capacity what it was working earlier. However, the full capacity of Terminal 1 will be used maybe in the third or fourth quarter once we complete the canopy work.

So it will be a slow progression of full utilization of the space in that terminal, which has been created, but because of the foyer work, there will be a slight delay in that expansion of throughput through that airport.

Basically, we are operating only one the check-in island for the purpose of immediately starting the operations. So we will open the other - 3 check-in islands over a period of time, maybe by third quarter of this financial year.

And the traffic has not been impacted because when the event happened, the traffic was moved to terminal 2 and terminal 3. Now going forward, the traffic will start moving back from terminal 2 and terminal 3 back to terminal 1. So from a revenue perspective, there is no impact.

Okay. Got it. This is very clear. Wish you and the team all the very best for the remaining quarters. I'll come back in the queue for additional questions.

Thank you.

The next question is from the line of Prateek Kumar from Jefferies Group.

A couple of questions from my first question is on the merger part of the GAL and GIL and like some developments in the sector. So with Groupe ADP now coming directly as a listed company shareholder. Does it change anything operationally for the business? And how are they particularly like sort of looking forward to or contributing to travel retail opportunity for the company?

So Prateek, honestly, nothing has changed. They were the 49% equity holder of GMR Airports, which was a subsidiary of the Listco. Now they are just -- they're going to be 33% odd equity holder at the Listco. They had same number of board seats as the GMR family had at the private entity level. They will have the same board seats, 5, both for GMR family nominees and ADP, they will have 5 nominees. So nothing has actually changed. It's a very smooth migration of just shareholding from a private entity level to a public entity level. Obviously, the benefits are more from efficiency of movement of earnings once the entity starts -- the airport entities start to declare dividend. That will allow the Listco to receive the dividend in a more tax -efficient form, use that cash flows for its own balance sheet purposes and also for growth. If you look at the numbers, Prateek, which, look for example, Hyderabad Airport has now started to throw. The free cash generation of Hyderabad is very, very robust. And obviously, when Hyderabad is not in an expansion mode, they will be upstreaming those cash to its shareholders. Delhi, once the new tariff order comes, we'll be able to give you much better guidance. But we are targeting free cash for equity generation in next 3 to 4 years at Delhi Airport also. It's such a large airport. And once it starts to throw cash, it's big amounts of cash, which is there. So the whole idea is now very much balance sheet focused, operational focus, generation of free cash for equity, developing it into a very strong platform for future opportunities that we may get as we go forward within India and Asia. That is what our focus is. And ADP, of course, brings its strength in many aspects of airport development and operations. And what they were adding as contribution at the GMR Airports level, they are adding the same thing at the listed level which is GMR Airports Infrastructure Limited.

Next question is on your debt, like that's around INR 280 billion as of first quarter, ex- of FCCB. How do you see like that panning out with the capex, which is lined up for our Bhogapuram Airport over the next 12 months?

Bhogapuram Airport, now the construction is happening in full swing. And as Saurabh has explained, we have almost touched the 34% of the progress. In this current financial year, we are likely to spend about INR 12 billion to INR 13 billion on the capex.

So our INR 28,000 crores net debt could move to like what number -- is it like a peak number? Or that can move to INR 30,000 crores number?

Bhogapuram debt as of today, what we have drawn is only about INR 700 crores. The total debt to be availed is INR 3,250 crores, of that INR 700 crores only drawn. So another INR 2,500 crores will be added in the next 2 years.

Obviously, Prateek, the other airports will also be paring down debt. There would be some repayments of the principal that would be happening. So the net debt level, I think, should peak in the next 12 to 18 months, and then it should start to fall.

Okay. And my question on international opportunities, the competition has recently seen bidding for two international airports in Kenya and Taiwan. So what do you think from that perspective as a ADP consortium?

I think you're referring to a couple of these airports likely to be given on a nomination basis to particular competitor. So that's I think it's part of the game. And when it comes to we focusing on the opportunities -- right now, our focus is on Middle East. And more so where you can look at the asset-light opportunities like you would know we have submitted our bid for Kuwait Airport Terminal 2. Likewise, we are also looking at Abha in Saudi, that's where we have submitted our request for qualification. So whilst there's a large landscape and competition , yes, competition is there and competition will remain there. So we'll not take too much of what has gone to somebody on a nomination basis. That's part of the game, I would say.

So Prateek, I think I will again allude to something I just stated earlier. We have enough on our plates. We have today almost 100 million passenger throughput in our airports, both domestic and international. And if they are growing at about 10% to 15% every year, we are adding 1 or maybe 2 medium-sized airports in our portfolio. So our focus is more on our P&L, more on cash flow generation. And if within that focus, we do get an opportunity, which makes a compelling economic sense for our shareholders. We will surely not let it go. We will bid for those. But even if it doesn't come, for us, we are already adding 2 airports in our portfolio on an annual basis. That's the way we look at it.

Sorry, can you elaborate on the RFQs in Kuwait and Saudi. This is related to what asset -light contract?

So this Kuwait Terminal 2, I know where we have as GMR Infrastructure, we have put in our bid. So there are three bidders. We are awaiting the results. That's an asset -light bid for 10 years of operations and management contract. And there are two other bidders. So that's on Kuwait. Saudi, we have submitted our qualification and the next process will take place as we will go along in terms of RFP right? Still is in the early days, but these are the two places right now, we are putting our focus on.

The next question is from the line of Ganeshram from Unifi Capital.

Prateek has already asked some of my questions, but maybe if I could just post one on the capex and then just get back to the debt. On the capex, okay, Hyderabad, Delhi mostly done. And Goa, I remember you mentioning about INR 200 crores in the last quarter. Now I'm just trying to see more on the Bhogapuram side? So we've done about 34%, 35%, and we're expecting INR 12 billion to INR 13 billion at the year -end, right? So if you could just tell us, is this capex more of a front -loaded nature? Or how is it going to be split across the timeline of the project? So that's probably the first question. And then given the number of subsidiaries and airports that we have right? So what would sort of be the maintenance capex on these assets once this airport expansion takes place?

As far as the Bhogapuram is concerned, we are drawing the debt as and when required only. We have already infused with INR 8 00 crores of equity. So we have INR 800 crores equity is already infused and INR 700 crores on the draw. So we have been drawing a very less amount as and when required only. It is not front-loaded. It is only spread over a period of 2 years.

See the expansion has been completed. Since we hardly have any operational capex, it will be normally -- operational capex will be in the range of about INR 1.5 billion to INR 2 billion in case of Delhi and around INR 1 billion INR 1.5 billion in case of Hyderabad.

Okay. That is very clear now. You did mention that we are expecting that -- I mean, that to sort of peak out in the next 12 to 18 months and your focus on the P&L and cash flows, I'm pretty sure is very well appreciated. So I just wanted to pass that feedback.

As there are no further questions, I would now like to hand the conference over to Mr. Saurabh Chawla for closing comments.

Yes. Thank you. Thank you, everybody, for joining this first merged entity quarter earnings call. And the team is available to answer any further queries you may have, and you can reach them either on mobile or by e -mail. We're happy to answer any further questions you may have. And have a wonderful Independence Day tomorrow.

On behalf of GMR Airports Infrastructure Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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