GMR Infrastructure Ltd
NSE:GMRINFRA
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Ladies and gentlemen, good day, and welcome to the GMR Infrastructure Limited Q1 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. We have with us today Mr. Saurabh Chawla, Executive Director, Finance and Strategy; and CFOs of GMR's business verticals. Before we begin, I would like to state that some of the statements made in today's discussions may be forward-looking in nature and may involve risks and uncertainties. Also, recording or transcribing of this call without prior permission of the management is strictly prohibited. I now hand the conference over to Mr. Saurabh Chawla for opening remarks. Thank you, and over to you, sir.
Thank you. Good afternoon to all. I welcome you all to the first quarter results of fiscal year '20. As you are aware, the government has recently announced over INR 100 trillion of investment in infra space by 2024 to make India USD 5 trillion economy. It is a very exciting time for us and a very uniquely positioned company in that particular space. The government is also taking certain proactive steps to support the growth of the domestic air travel by privatizing an additional 20 to 25 airports. This is encouraging from GMR perspective as we are amongst -- one of the largest infrastructure players in the country, particularly in the airport sector. During the quarter, we have focused on completion of various initiatives, which we had undertaken in the previous quarters towards our objective of deleveraging our balance sheet and focusing on the airport sector. I will brief you on the progress made during this quarter. With regards to the proposed transaction for a stake sale at GMR Airports for INR 8,000 crores, we have now executed definitive agreements with our investors and are awaiting regulatory approvals. We expect the regulatory approvals to be in place by end August, early September, post which we expect the closing to happen within this quarter itself. During the quarter, we completed the implementation of the resolution plan of our stressed energy assets, which have significantly derisked our balance sheet. It is very important to mention that we have achieved the resolution of 2 power projects bilaterally with a consortium of tenders and have received approvals from 100% of lenders. We've now successfully completed the implementation of the resolution plan of GREL for Rajahmundry power project. Now GREL has a residual sustainable debt of about INR 1,130-odd crores against the total debt of about INR 2,350-odd crores earlier. This debt is now repayable in 20 years. Consequently, the corporate guarantee expanded by the holding company, GMR Infra, has also reduced down to about INR 1,130-odd crores. We have also divested our entire stake of 47.62% in Chhattisgarh power project to Adani Power. The shares have already been transferred, and the plant has been handed over to Adani Power Limited. Chhattisgarh power project has a total debt of about INR 5,926 crores and a negative contribution of about INR 516 crores in the consolidated P&L of GMR Infra for fiscal year '19. During the quarter, no loss of this power project has been taken into the P&L. On the operating side to look at our consolidated financials, we recorded gross revenue of about INR 1,992 crores during the quarter as against INR 1,738 crores during the corresponding quarter last year. EBITDA margin has increased to 40% to about INR 599 crores during the quarter as compared to 33% at INR 436 crores during the previous quarter, a healthy growth. Net loss before tax is at about INR 279 crores during the quarter as against a net loss before tax about INR 290 crores during the corresponding quarter last year. Net loss after tax widened to about INR 335 crores during the quarter as against INR 238 crores during the corresponding quarter last year, mainly due to tax implications. We are now on a path to profitability as the equity fund raise of about INR 8,000 crores will be primarily used to repay that debt resulting in savings and interest expenses. The one on asset basis, I'll talk about the Delhi Airport first. At the Delhi Airport, the traffic declined by 10% year-on-year to about 15.7 million passengers in Q1 FY '20 from 17.6 million in Q1 FY '19 on discontinuation of services by Jet Airways. However, in the current quarter, the gap is getting filled by other airlines, indicating a healthy underlying demand. Non-aero revenues grew by 9% Y-o-Y to about INR 552 crores Q1 fiscal year '20 from INR 507 crores in Q1 FY '19. Delhi Airport started receiving the lease rent from Bharti Realty pertaining to the recent land monetization for about 5 million square feet, whereby the developers agreed to pay onetime amount of about INR 1,837 crores and annual lease rentals of about INR 363 crores till 2036. During quarter 1 fiscal year '20, about INR 100 crores of lease rent has been received from this [ deal ]. As a result, the CPD rentals grew by about 2.9x in INR -- to INR 139 crores in Q1 FY '20 from INR 48 crores in Q1 FY '19.PAT at Delhi Airport grew to INR 13 crores in Q1 FY '20, against a net loss of INR 128 crores in the Q1 of the previous year, fiscal year '19. DIAL Airport generated a cash profit of about INR 186 crores in Q1 FY '20 versus cash loss of INR 30 crores in the previous year during the same period. Delhi Duty Free services opened its new duty-free shops following the renovation at its arrival and departure locations at Delhi International Airport Terminal 3 recently. Delhi Airport has also been awarded with a CAP 2.2 Climate Oriented Company award by CII-ITC Centre of Excellence for Sustainable Development.DIAL is the only Indian airport to commission air side driving simulators and operationalized dedicated trans-equipment excellence sector. DIAL has also undertaken on the expansion plan to handle capacity of more than or up to 100 million passengers by 2022. Post-completion, DIAL would be the only airport in India to have 4 runways and dual-elevated eastern cross taxiways. L&T has been entrusted with the entire EPC works. Coming to Hyderabad Airport. In Hyderabad, the traffic grew about 8% year-on-year to 5.5 million passengers from about 5.2 million passengers in Q1 FY '19. And this is despite Jet Airways discontinuing its operations. Non-aero revenues grew by 20% year-on-year to INR 148 crores in Q1 FY '20 from INR 124 crores in Q1 FY '19. Profit after tax of INR 183 crores was achieved in Q1 FY '20 versus INR 185 crores in FY '19. This is primarily due to additional expenses of 2 interim terminals, which led to a 27% increase Y-on-Y on operating expenses resulting a flat back. It generated a cash profit of about INR 215 crores versus INR 214 crores, basically a flat performance as far as the cash profit is concerned, year-on-year. The agreement to lease has also been signed in Hyderabad. Amazon has signed up 261,000 square feet of a warehouse and SAFRAN Aircraft Engines for about 165,000 square feet facility in the SEZ location for manufacturing of aircraft engine components. Hyderabad airport is the first airport in the country to start trials for the face recognition based end-to-end passenger processing systems. It has also won the Best Regional Airport award by Skytrax for 2019. New destinations have been added in Hyderabad. Cities like Gwalior, Belgaum, Kishangarh. Others have all contributed to the growth of traffic and will continue to grow as we go forward. Even flight frequencies have been added to Jeddah, Mumbai, Chennai, [indiscernible] Rajahmundry and [indiscernible].The expansion work for airport is progressing as per schedule and is likely to be completed by March 2022. Post-completion, Hyderabad Airport will have the capacity to handle about 34 million passengers per annum compared to 12 million passengers today. Currently, it is handling in excess of 21 million passengers. Cebu Airport in Philippines is doing exceptionally well. The traffic in Cebu in Philippines grew by about 13% year-on-year to about 3.06 million passengers in Q1 from 2.7 in Q1 '19. New terminal has been commissioned in June last year, taking the total capacity to about 15 million passengers from 5 million earlier. The revenue has increased by 50% year-on-year to INR 118 crores in Q1 fiscal year '20 from INR 79 crores in Q1 FY '19. Cash profit has increased by about 8% year-on-year to INR 47 crores in Q1 fiscal year '20 from INR 43 crores in Q1 fiscal year '19. Coming to the energy sector. I would like to take this opportunity to brief you that the major sector developments during this quarter were in order to address the huge outstandings on account of unpaid power bills by DISCOM. The Minister of State of Power and Renewable Energy -- Non-Renewable Energy has set up a Payment Security Mechanism and made it mandatory that power shall be dispatched only after Letter of Credit has been opened, and electricity shall be supplied only up to the quantity equivalent to the value of Letter of Credit. This is a welcome step. It will go a long way in alleviating issues in the sector. We hope that these measures get implemented in the right spirit with vigor. Coming to specific assets in the power sector. In Kamalanga power project, there has been a partial shutdown on account of plant maintenance in this quarter, which has resulted in a PLF of about 76.5% during the quarter. Our revenue has increased by 21% year-on-year to about INR 554 crores versus INR 457 crores last year. It generated a cash profit of about INR 44 crores during the quarter as against INR 43 crores in the same quarter last year. In the Warora power project, due to better coal availability from Coal India Limited, which has resulted in a higher PLF of about 87.5% during the quarter. The revenue increased by about 2% to about INR 473 crores from the previous -- from the same quarter last year. It generated a cash profit about INR 38 crores in the first quarter against INR 43 crores in Q1 '19. In our coal business, the Indonesian coal mine, the volumes have grown there. The sales volume has grown by about 35% year-on-year to about 7.5 million tonnes in Q1 FY '20 from 5.6 million tonnes in Q1 FY '19. Revenue grew by about 7% year-on-year to INR 1,898 crores in Q1 FY '20 from INR 1,772 crores in Q1 FY '19. Overall, I would say, it's been a much better quarter. And as we go forward upon the completion of our strategic stake sale in our GMR airports, and the money is coming in to deleverage our balance sheet, we intend to further give momentum to our performance during the current fiscal year and going forward into the next year as such. At this stage, I will stop and I open the whole platform for any questions that our analysts and investors may have. Thank you so much.
[Operator Instructions] The first question is from the line of Mohit Kumar from IDFC Securities.
Sir, on the very first slide of the presentation where you had talked about strategic investment and the proposed restructuring. Is it possible to give us a sense of time line for the money to come in for the strategic investment and about the proposed restructuring. So what is the kind of time line you're looking at -- when are the [ post-applied ] to the [ NCLT ] for the approval of vertical demerger?
So primarily, I think I did put into my opening remarks, we are awaiting the regulatory approvals of the transaction. We hope that by end of August, early September, we will have all the regulatory approvals in place for a closing of the transaction to happen. We continue to be positive on the closing happening within this quarter 2 itself and the money is coming in within this quarter 2 itself. But again, I will just qualify this that as it's regulatory approvals, we don't have full control on that. But this is what our general expectation and guidance is. With respect to the vertical demerger, we expect that, that will go forward in the third quarter after this transaction has closed. I would again qualify this as that this is still subject to the approval of the committee of Board of Directors. They are evaluating the -- all the points related to this vertical demerger. So after the transaction of strategic sale of equity is closed, we will be working and closing our deliberations with our Board of Directors, and subject to their approval, we will be filing for a vertical demerger in the third quarter. That's a broad sense of the time lines.
Okay. My second question is on the status of tariff for the Delhi. Has the consultation paper been published by the AERA or [indiscernible] otherwise?
As far as the DIAL is concerned, the consultation bill is not yet out. We are expecting only by 30th September because they have appointed some consultants for study, and that is likely to be completed by end of this month.
Okay. And sir, on the -- what is the status of Bhogapuram Airport agreements? Is there any update which you can share?
There is no further update. As we explained last time, we were the highest bidder. So far, we have not yet received any communication from the government.
Last question, sir. How is the traffic panning out in last 45 days? Has it improved from Q1 or -- and the -- in terms of growth?
Traffic is coming back healthy. Compared to the April and May and June, July is much better, and we are almost on par with the corresponding month of the last year.
Our next question is from the line of Vipul Shah from Sumangal Investments.
Can you give me the aero revenues for Delhi and Hyderabad Airport for quarter 1 '20 and quarter 4 '19?
If you look aero revenue for Q1 '20 for Delhi Airport is about INR 236 crores, and non-aero is about INR 550 crores for Delhi Airport for FY '20.
For Q1 FY '20, right?
Yes. 1 FY '20.
Okay. And what was the same figure for quarter 4 '19?
The same figure for '19 were...
Quarter 4.
Quarter 4 was 2 -- it's in line. Quarter 4 was about INR 270-odd crores. The...
[indiscernible]
INR 270 crores. There's a small dip in the aero revenues in Delhi because if you remember, there's implementation of Base Airport Charge because there's a slight dip in the traffic numbers because of that debt issue, which just now are -- on Mr. Babu's information that we are catching up with that. So that is the aero. On the non-aero, we are growing in line. The non-aero in Q4 was about INR 500-odd crores, INR 520-odd crores in Q4 FY '19.
So that earlier controlled period tariff revision has not been implemented still?
That's what just we discussed...
So the -- sorry.
Yes. The tariff has been implemented. That is called Base Airport Charges. It is fully implemented in the fourth quarter of FY '19. In the first quarter of FY '20 also, the Base Airport Charges implemented because of the traffic fall, that's why the aero revenues have come down slightly, as in there's INR 273 crores in the fourth quarter, we have earned INR 256 crores. However, from July onwards, we are expecting -- since the traffic is back, we are expecting that we will be able to achieve the same aero revenue. As far as non-aero is concerned, there is an increase despite the fact that there is a fall in the traffic. Still our non-aero revenue has grown from INR 526 crores in Q4 FY '19 to INR 153 crores in Q1 FY '20.
And sir, what will be the lease rental income from -- what -- from Bharti Realty per quarter?
It is INR 363 crores for the full year.
INR 203 crores.
Yes. Per annum for the 4.9 million square foot.
And this will be for how many years, sir?
This is a coterminus along with the contract. It is 2066.
Just to add, this number of INR 360 crores will be there till 2030. Post-debt, there will be increase of 50% on this till 2066.
Our next question is from the line of Ashish Shah from Centrum Broking.
Sir, could you help me the debt numbers for Kamalanga and Warora? What is the gross debt, maybe outstanding, at this point?
If you look at the Warora, Warora is -- as of June, is close to about INR 3,000 crores. And for Kamalanga, it is about INR 4,000 crores.
Okay. And sir, how much is due for repayment this year in both of these plants?
For Kamalanga, there is no repayment due. And for Warora INR 3,180 crores.
Okay. So Kamalanga would have something in '21, in terms of repayment?
Yes.
Okay. Sir, any quantum, if at all?
We will get back.
Sure, sure. No worries.
We'll answer offline on that, so we should get that data for you.
Sir, secondly, on the progress in the Kakinada SEZ, so do we have something inside, has there been any progress in the last quarter or so in terms of any monetization of the land?
Just one second, please.
Sure.
Good afternoon, everybody. So far, as Kakinada project is concerned, we have signed the MOU with Haldia Petrochemicals, whereby Haldia will set up a refinery from petrochemical cracker in INR 9 billion investment. Currently, the government and Haldia are working on the preproject activities. Haldia has already obtained the environmental [ prework ] also, and they are expecting to achieve the financial closure by April 2020.
Sir, how much land is here in the MOU? How many acres?
They're -- they're acquiring 2,500 acres.
2,500 acres. And sir, how much is the value of this monetization?
See, we are yet to reach the consideration for the land monetization, the consideration value. Currently, discussions are progressing.
Sure. Sir, on the Goa and the Nagpur airports. Could you update what is the status of construction at Goa because either we get some sense that probably the construction is halted at this time due to certain local issues there. So could you just help us understand the status?
When it comes to the Goa, the construction is under -- on stoppage because of the Supreme Court order. This is the final appeal, which has been made against the NGT order by the NGOs of Goa. And the matter has already been heard. We are awaiting for the final award. We are expecting that we should be able to start the construction by September. That is the development as far as Goa is concerned. Last...
Sorry to interrupt, sir, but that is subject to the Supreme Court permitting the construction to complete.
Yes, yes, yes. Because we have submitted the Ministry of the Environment and Forests, that they have submitted their final report to the Supreme Court as well as the Government of Goa. So we do not foresee any more further hurdles from the Supreme Court side.
Sure. Sir, on the -- on Nagpur Airport?
Nagpur side, as far as the -- we have already issued LY in the month of March. We are just in the process of creating a company. So we are hoping that we'll be able to sign the agreement by end of this month.
Sir, broadly, could you define what is your scope there in terms of what is the initial CapEx and how much the capacity expansion will happen in...
Nagpur Airport currently is operating around 3.3 million. We are expected to build 12 million capacity, no run way is required. We have to build a new terminal along with the apron and access suite. As of today, we do not -- I mean, we are expecting the total project cost will be around INR 20 billion. It is a brownfield airport, so we will be taking over the entire operating airport and the day 1, it'll be the profits. So we are expecting good amount of the money will be utilized in the new accruals for the purpose of expansion.
Right. But yet, the expansion will have to go through the environment ministry clearances, right? Or that is already done?
So that is the government responsibility because we are not going ahead and it is not a new greenfield airport. It is a brownfield airport. Runway's case, we are not going to build anything yet. It is only the new terminal along with the apron we are going to build it. So we do not find any difficulty as far as the environment clearance is concerned because it's a running airport.
Sure. Sir, lastly from my side. Since we are evaluating or considering the demerger or a vertical demerger. So what happens to the FCCB, which is there in the GMR parent? So how does that get split or be repaid, converted? How -- what happens to that?
Those aspects have still yet to be decided. It's under evaluation, and there will be an allocation of that FCCB between the airport vertical and a non-airport vertical. I think we should wait for that evaluation to complete. And once we file with the NCLT, I mean, everything will be in public space.
[Operator Instructions] We have the next question from the line of Aditya Chandrasekar from Edelweiss.
What are the receivables currently in Kamalanga and the Warora plant?
The total receivables, including the regulatory, is close to INR 895 crores in Kamalanga and in Warora it's INR 442 crores, including the...
Sorry sir, how much?
If you see for both the plants, Warora and Kamalanga put together, the receivables are close to INR 1,200 crores.
Okay. INR 895 crores in Kamalanga and INR 443 crores, is it in Warora?
Yes. So about [ INR 1,200 crores ]. Warora is INR 442 crores and Kamalanga is INR 895 crores.
Okay. And sir, my second question is the CapEx in both Delhi and Hyderabad for expansion. So is it possible to tell us like how much has been incurred? How much we're expanding, et cetera? Just the status of the expansion basically.
As far as the Delhi is concerned, the total CapEx program, I think, we have already explained last time. So we have incurred about -- we have paid advance to the EPC contractor of about INR 760 crores. And we've also incurred about INR 220 crores. Around INR 1,100 crores in the total we have paid so far to the EPC contractor. As Hyderabad is concerned, it's around INR 1,000 crores we have disbursed.
Incurred around INR 1,000 crores?
Yes.
Our next question is from the line of Aditya Mongia from Kotak Securities.
Yes. Sir, I have a question to my side [indiscernible]
Mr. Mongia, I'm sorry, we are not able to hear you clearly.
Can you hear me now?
Yes, sir.
Sure. So the first question was on the corporate debt. Just wanted to get a sense from you as to where do you see this debt level peeking out?
Well, we're actually in the process of reducing this debt substantially. So the main reason why we are divesting 44% in our airports vertical is to make this debt almost negligible. So hopefully, I think, within this quarter itself, if we achieve our closing, the debt would have peaked out.
Sir, debt for the period is already inside the numbers [indiscernible]?
Yes. Everything is part of that.
Okay. Got that. The second thing is, I think, if everything goes as per plan and INR 8,000 crores comes in, just wanted to get a sense from you that given the CapEx requirement in Delhi and Hyderabad, what is the growth capital that you are left with to be bidding for the incremental airport purchase?
Well, primarily, if you look at -- we have entered this partnership with very long-term investors, both financial and strategic guys. Whilst any growth plans, which are there in Delhi, it's primarily with its own expansion to 100 million passengers. And that's almost funded with all the capital raise and economic rules that are already there, including the leasing out of land to Bharti. Same goes with Hyderabad. So for their own expansion for next many years, the capital funding is already in place. Any additional growth, which may be in the greenfield space or maybe even in brownfield space and new airport space, there is enough capacity available because after a point of time, these airports are going to start throwing out dividends. And we have the ability then to monetize those dividends and utilize them for bidding of other airports, whether in the country or abroad. Last but not the least, if any, CapEx -- capital is required, we can also leverage the balance sheet of this platform. Because this platform's balance sheet can also get delevered by about INR 1,000-odd cores with the current transaction. So broadly, I mean, the -- not only the balance sheet gets strengthened at the corporate level, but the balance sheet is actually also getting strengthened at the airport platform level. So growth will not be -- or the opportunities and growth, we won't let that go by. And we will be looking aggressively in that space, although for the next few years, our bandwidth is fully committed to expanding the existing airports and building out the new ones, whether in Goa or Nagpur.
Yes. [indiscernible]. The basic question was [indiscernible]. Is there an upper limit to what [indiscernible] we look to [indiscernible].
You voice was breaking, I can't hear you [indiscernible]
Can you hear me now?
Yes.
Is INR 8,000 crores are hard stop from -- in terms of money getting coming from these 3 partners of yours. So is there more money coming in increment. [indiscernible] if you require money for [indiscernible] airport verticals.
Sorry, Aditya, we are not able to hear you. At this stage, just to answer your first part of the question, which we heard clearly. Second part, we did not. Yes, INR 8,000 crores is a hard stop as far as equity investment into the airport vertical. Any further requirement will be met through the leverage at the platform level. These have been evaluated along with our prospective new shareholders. We can lever that up as we go through.
Sure. The last question from my side. I hope my voice is clear right now?
Yes. It's better right now.
Sir, last question. Obviously, the maintenance of [indiscernible] were quite fast in getting all these strategic initiatives of monetization [indiscernible] coming from a fairly good pace. Now let's [indiscernible] to also come back from Kamalanga and Warora. What is [indiscernible] focus points for the management as they...
Sorry, Aditya. Sorry to intervene. We are not able to understand what you're saying. There's -- the voice is breaking, it's cracking.
I'll [indiscernible] again for the call.
[Operator Instructions] Our next question is from the line of Vipul Shah from Sumangal Investments.
If I understood correctly, all the proceeds from this INR 8,000 crore airport to vertical shall go towards reducing debt at the corporate level? Have I understood it correctly, sir?
Yes, you have. Out of that INR 8,000 crores, INR 7,000 crores is at the corporate level, INR 1,000 crores is at the GMR Airports Limited, which is the platform level. But -- that both the net debt comes off in both the cases.
Our next question is from the line of [ Ashok Kumar Jain ], an individual Investor.
I just wanted to know whether Bharti Realty INR 1,837 crore has been received, full payment, sir?
Just one second.
Yes. The Bharti Realty -- Saurabh, are you able to hear us?
Yes, yes, sir.
Yes. GRK, go ahead.
Sir, as far as the Bharti Realty, the 4.9 million square foot is concerned, we are expected to receive the payment of around INR 1,500 crore of the deposit and ADC will be by end of October, and the lease rentals only in December 2019.
Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the floor back to the management for closing comments. Over to you, sir.
Thank you, everybody, for participating in our first quarter financial fiscal year '20 call. We are available off-line to answer any of your questions. Any specific questions you may have on the balance sheet of any of our verticals, you can reach out to Amit, and we'll be glad in providing you with all the information. Thank you so much.
Thank you, members of the management. Ladies and gentlemen, on behalf of GMR Infrastructure Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.