InvestorQ : What is the reason for GMR doing a major Rs.2000 crore QIP in the market?
vidhya Laxmi made post

What is the reason for GMR doing a major Rs.2000 crore QIP in the market?

sarah Leo answered.
7 months ago

GMR is currently in the process of a qualified institutional placement or QIP that could range between Rs.1000 crore and Rs.2000 crore. The intent of the QIP is to reduce the debt on its balance sheet, which would allow the company to reduce its financial risk.

Of course, the final quantum or issue size will depend on the feedback from investors and the appetite in the market. The IP is expected to be launched in October 2020 and road-shows are likely to start in September. Final board approval for the same is still pending.

It has a total plan to raise up to Rs.5000 crore in one or more tranches via the QIP route but the first tranche is likely to be much smaller than that. Its business has been struggling a tad as its main airport business revenues are lower due to the lockdown.

It has a slight financial value mismatch. It has a market cap of Rs.15,600 crore with promoters holding 54.78%. However, the group net debt stands at Rs.25,600 crore. GMR needs to cut down on debt to make any serious accretion to market value.

Currently, GMR operates the Indira Gandhi International Airport in New Delhi as well as Hyderabad's Rajiv Gandhi International Airport. Internationally, it also operates the Mactan Cebu International Airport in partnership with Megawide in the Philippines.

The management of GMR is confident that while there has been a visible impact of the COVID-19 on the business in the short term, the management does not anticipate medium to long term risk to the business prospects. That may be the good news for GMR.