GMR Infrastructure Ltd
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GMR Infrastructure Ltd
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Ladies and gentlemen, good day, and welcome to GMR Infrastructure Limited Conference Call to discuss Q1 FY 2022 Results. [Operator Instructions] Please note that this conference has been recorded.We have with us today Mr. Saurabh Chawla, Executive Director, Finance and Strategy. Before we begin, I would like to state that some of the statements made in today's discussion 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 over the conference to Mr. Saurabh Chawla for the opening remarks. Thank you, and over to you, sir.
Thank you. Good afternoon, ladies and gentlemen. I welcome you all to the first quarter fiscal '22 earnings call. I hope everyone on the call and their families are safe. As you know, India's economy, which was showing signs of early recovery until early 2021 after the first COVID-19 surge was again hit by a second wave of the pandemic. Most economic activity indicators which peaked in the month of March took a hit again during April and May. However, after peaking in mid-May, the second wave conditions have abated faster than we all anticipated. COVID daily cases are now significantly down from the second wave peak of 4 lakh cases a day to under 40,000 cases a day today. Given these conditions, our focus continues to be on, firstly, to ensure safety and welfare of our employees. We launched workplace vaccination centers in our offices for accelerated vaccination of all employees and the immediate family members. We continue to operate a war room to assist employees and family members with hospitalization, especially at the time of shortage of hospital beds.Secondly, we ensure that adequate liquidity was always maintained in our operations. We completed offerings of nonconvertible debentures of Delhi Airport increase about INR 3,257 crores. The proceeds of the NCDs were utilized to refinance the outstanding debt of about USD 289 million due in fiscal year '22, and to partly finance the Phase 3A expansion. We completed the financial closure of Goa for a CapEx of the new greenfield airport -- international airport, amounting to about INR 27 billion -- INR 26 million. We also completed divestment of the Kakinada special investment region and have received the first tranche of consideration of INR 1,692 crores out of the total consideration of INR 2,719 crores. Additionally, about INR 1,027 crores is to be received in the next 2 to 3 years, which is contingent upon certain agreed milestones.As part of the agreement, 51% equity stake held in Kakinada SEZ through GMR SEZ and Port Holdings Limited is divested to Aurobindo Reality and Infrastructure Private Limited.Currently, we initiated cost-saving measures, mainly through consolidation and reopening of terminals as per the demand supply dynamics. Due to second wave, we closed Terminal 2 in May of 2021, which will again reopen -- which was reopened in October 2020, post the first wave of the COVID pandemic. However, as we speak right now, it has again been reopened in July as the traffic has recovered substantially since the trough of month of May.Fourthly, our focus continues to be on the completion of CapEx as per schedule. In Delhi, Hyderabad and Goa airports, 47%, 62% and 35% of overall progress has been achieved, respectively, as on July 31, 2021.Lastly and very importantly, we've been taking proactive steps to expedite activities for completion of the demerger within fiscal year '22. In this regard, process for obtaining requisite approvals from the relevant stakeholders, especially the financial and operational creditors were initiated.I'm happy to announce the approvals for the demerger from majority of the financial creditors are -- is now in place. We just await the judicial process to be concluded by the NCLT to formally record the approvals from the financial creditors and shareholders in our NCLT-convened meeting.Coming to the business front, GMR's businesses, which have been impacted by the lockdown measures of the government due to the second surge of COVID is on a recovery path. I want to talk first on the airport business. The second wave of COVID significantly impacted traffic at our operation airports, bringing the domestic passenger numbers down to 20% of pre-COVID level in this May from a level of 70%. However, traffic has now recovered and has reached near post-first wave heights. To give you some perspective on airport's performance, let me speak on how Delhi Airport has performed.Since reopening in May 2020, daily airport daily average passenger peaked in February of 2021. And domestic and international traffic reached 71% and 31% of pre-COVID levels respectively. In May 2021, domestic and international traffic passenger -- of passengers declined to 19% and 11%. But as COVID cases subsided, domestic and international traffic has turned around and has reached a level of 67% and 21% during the week ended August 8, 2021.Trend was similar for Hyderabad Airport as the domestic and international traffic peaked at 72% and 29% of pre-COVID level in February 2021 and declined to 18% and 10% respectively in May 2021 and now has quickly increased back to 67% and 19% during the week ended August 8, 2021.Indian airports' traffic is supported mainly by the visiting friends and relatives, which contribute to almost 50% of total domestic passenger traffic, whereas leisure travel has contributed between 20% to 25%. The quick turnaround and surge in traffic is encouraging, considering Government of India imposed curb on the capacity of airlines at 50% from June 2021, which is later revised to 65% from July 5 and as on date, this has now gone up to 72.5%.Cargo business continues to be resilient and was not impacted much by the second wave with the traffic at above 85% of pre-COVID level for both Delhi and Hyderabad Airports. We expect traffic to gain further momentum with the reducing trend in COVID cases, lifting of government restrictions and the airline capacity and the increased pace of vaccination.India's daily new COVID cases remain stable and low, while vaccination is picking up pace. About 52 crore vaccine doses have already been administered as on August 11, 2021, in India. Metro cities, which are core to our businesses, have recorded much higher vaccine coverage than the India average.Going forward, speed of vaccination is set to improve due to increased production of Covishield and Covaxin vaccines. Additionally, rollout of Sputnik and Johnson & Johnson doses will further strengthen vaccination program. The Government of India is working on vaccinating all citizens by December end of 2021. And when I say vaccinating all citizens, I mean double doses wherever required. Globally too, countries have resorted to fast vaccine issue measures to unlock economy, which will provide further boost to international traffic. Globally, about 450 crore vaccine doses have been administered so far. The effect of vaccination in other countries can also be seen from the fact that July 2021 was the busiest month for Britain's Heathrow Airport since March 2020 as the passenger numbers surged to about 1.2 million as travel restrictions were eased. Only this morning, U.K. has increased flights from India to 34 a week.Air bubbles arrangement will continue for the next few months, aiding the recovery of international traffic. Currently, air bubbles arrangements are with 28 nations, including U.S.A., U.K., Canada, Germany, France, et cetera. During COVID second wave, most nations had banned entry of Indian travelers. Post-moderation of the second wave, various countries including Netherlands, United Arab Emirates, U.S., U.K., Qatar, Germany, Lebanon, Maldives, France, Spain and Cambodia have lifted ban on the Indian travelers.Additional traveler for traffic is also expected to be fleet addition by major Indian airlines and entry of new airlines, including Jet Airways, which will aid expansion of the operating capacity. Media sources indicate that 4 entities, SMV Aviation, Turbo Megha Airways, Jet Freight Logistics and Spice Express and Logistics have applied for NOCs from the Ministry of Civil Aviation to start schedule the air passenger services and air cargo services.Market expansion from entry of new airlines suggests significantly higher potential for traffic growth in India. Based on all these key factors, we anticipate a return to peak over level of traffic in our Indian airports by end of fiscal year '22, driven primarily by the domestic segment.Coming to other sources of revenues for our airport business, CPD, for example, even during the ongoing pandemic, we were -- we were successful in monetizing land at Hyderabad Airport. Boston Living, an incubation venture of INCOR, signed definitive agreements with GMR Hyderabad to develop co-living and service residences. As part of the agreement, GMR Hyderabad Aerocity will lease land to Boston Living to develop 0.5 million square feet space.During quarter 1 of this fiscal year, we also executed industrial partnership with Groupe ADP, our 49% shareholders in the airport platform demonstrating our intent to cooperate with each other with a shared global vision for the airport sector. This marks a new city to construct to build the world's largest airport alliance to welcome passengers and leverage both group's expertise to continuously improve operations. This industrial partnership allow us to systematically explore and seize the opportunities to design the future of our industry with the ambition to set the highest standards in terms of performance, operations, hospitality and sustainability.I would like to highlight our notable development in the airport sector. Airports Economic Regulatory Authority of India bill 2021 was recently passed in the parliament. The bill amends the definition of major airport, allowing direct determination of growth of airports. It would help encourage the development of smaller airports. This approach would help in the development of more airports through the PPP route, thus expanding the air connectivity to relatively remote and [indiscernible] areas. We expect the big opportunities to gain momentum in India due to this bill. On the energy business, power demand and core supply are improving as a lockdown is in the up. In our power plant in Kamalanga, it clocked the best operational performance in Q1 fiscal year '22, with a PLF of 83%. However, in July, the PLF was marginally down at 77%, basically impacted due to the maintenance of unit 1.In the Warora plant, the PLF of 54% in quarter 1 was impacted by lower supply of linkage coal from mines, lower rates on the exchange and delayed realization from this comps. Our PLF in July 21 improved to 67% due to improvement in the rates on the exchange and greater availability of coal.On Kamalanga, we have received a favorable order from APTEL. As per the APTEL order passed on August 6, 2021, all the amounts due and tabled to Kamalanga, that Bihar DISCOM due to various changes in law events shall be paid along with the carrying costs in accordance with law within 6 weeks from 6 August, 2021.Kamalanga is entitled to recover expenditure involved in the procurement of alternate coal due to shortfall in domestic coal supply corresponding to schedule generation pertaining to Bihar PPA, thereby restoring Kamalanga to sum the same economic position as before as there was no change in [indiscernible]. PT GEMS, our investment in this Indonesian coal company -- coal mining company, was able to showcase its strength despite COVID by reporting sales growth of 4% Y-on-Y and EBITDA margin of USD 14.6 per tonne for quarter 1 fiscal year '22. This is primarily driven by 16% Y-on-Y increase in realization.Total costs reduced by 11% Y-on-Y to USD 26.5 per tonne in the quarter 1. This quarter has been significant due to the following. It is the best quarter in PT GEM's history in terms of PBT. It generated about USD 129 million. Highest coal production in a quarter since inception, despite adverse weather conditions. Robust EBITDA margins of $136 million, which is almost $14.6 per tonne.And finally, a final dividend for calendar year 2020 from USD 75 million was declared in May 2021. Additionally, an interim dividend for calendar year 2021 of USD 75 million was declared in April of this year.The market prices of coal continues to be bullish with increased demand from China. This is reflected by PT GEM's profitability for the period. The market prices are expected to be in the current range for the next few months as the spat between China and Australia is not coming to any resolution as we speak.Thermal coal continues and remains to be an important source of fuel for developing countries in Asia, and our business will remain well-positioned to benefit from this growing demand in the emerging markets.On the highway business, Hyderabad-Vijayawada expressway traffic increased by 61% year-on-year to 8.4 million vehicles during April '21 to June '21. However, per day average volume decreased by 36% month-on-month in the month of May due to the lockdown, but bounced back by 30% month-on-month in June '21 and 24% in July '21 as the lockdowns were eased.Toll at Ambala-Chandigarh expressway has been suspended since October 12 due to the farmer agitation. In this regard, GMR Ambala-Chandigarh expressway has declared a force majeure event under this concession agreement and has notified NHAI. As per the concession agreement, GMR Ambala-Chandigarh expressway is entitled to compensation for this force majeure event by way of extension in the concession period, reimbursement of O&M costs, et cetera. Claim for force majeure up to March '21 has been filed by us.On the status of arbitration award on Hyderabad-Vijayawada project, an independent expert appointed by the sole arbitrator has submitted his report on the quantification of claims. Arguments will be made from September 22 for finalization of the clean amount. As per the management expectation, based on external legal opinions and valuation performed by independent experts, the recoverable amounts are in excess of INR 1,900 crores as at March 31, 2021.On the dedicated freight corridor project, the construction work is picking up pace. As you know, GMR, along with its partner, SEW Infra have been executing an EPC contract to construct a part of the eastern freight corridor, that is 181 kilometers of Mughalsarai to New Karchana in UP and 236 kilometers of New Karchana to New Bhaupur UP lines. Around 74% of package 201 and around 80% of package 202 has been completed.I would also like to briefly touch on the best practices and recognitions received by GMR Group on the ESG front. On the airports front, Delhi Airport received a platinum recognition in the Green Airports run by ACI, Asia-Pacific and over 25 million passenger category. It has been adjudged the best regional airport in India and Central Asia for the third consecutive year in 2021 by Skytrax. It is bestowed with the COVID-19 Airport Excellence Award for providing exemplary safety protocols during the global pandemic, making it the only airport in India to describe this category.Hyderabad Airport received ACI, Asia-Pacific Green Airports gold recognition in 2021 and adjudged the best regional airport in India and Central Asia by Skytrax. It also bagged the third rank in the cleanest airport in India and Central Asia category, fourth in the best airport staff in India and Central Asia, and sixth rank in the best regional airports in Asia category by Skytrax. Hyderabad Airport is also commissioned its second 5 megawatts solar power plant in July '21.On the energy business front, some of the safety tariff performance highlights were Kamalanga's plants lost time injury frequency rate, which is LTIFR and lost time injury severity rate, which is LTISR of 0.00 in quarter 1 fiscal year '22. The same was achieved at the Warora plant for this particular quarter.In PT GEMS, corporate, social and environmental responsibility programs are constantly aligned with the 7 core subjects of ISO 26000 and support the UN sustainable development goals. PT GEMS, through its subsidiaries, has won several awards certifications in the field of environmental management, which include GREEN rating for PROPER to PT Borneo Indobara from Ministry of Environment and Forestry for the achievement and performance in the field of management and monitoring of mining environment of subsidiaries for the period 2018 to 2020.BLUE rating for PROPER to PT Kuansing Inti Makmur from the Ministry of Environment and Forestry for the achievement and performance in the field of management and monitoring of mining environment of subsidiaries for the period 2018 to 2020.The presentation, which we have sent to you with all the financial numbers are available with you. If not, you can download it from our IR section on our website. We are available to respond to your questions on this call and offline post the call.Now I would like to open the forum where my colleagues from the corporate and the businesses can answer your queries. Thank you so much.
[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.
Congratulation on raising money, especially your financial closure at Goa, and raising Aerocity at Delhi Airport. Of course, a very tough and challenging environment for us. So my first question is, sir, on the -- is it a re-phasing of projects at DIAL and HIAL emission in the PBT, sir, can you just let me know the new commissioning deadline for DIAL and HIAL?
Yes. [Indiscernible], why don't you [indiscernible]?
Yes. Sir, as the DIAL is concerned, we have originally planned in April '22, which has been last year itself we have shifted to June '22. And because of the second -- it's '23, the second wave is expected to -- by September 2023 as far as the DIAL is concerned. Hyderabad is getting closed by December '22. And Goa is August 2022.
August '22?
Yes.
Okay. Sir, secondly there are -- given that we are coming very close to -- close to demerger, is there a broad understanding between the financial creditors on the way our balance sheet will look like? And when do we -- when can we expect it to be made public in the sense that we as an analyst community could see it?
Well, you're right, I mean, there is an agreement in place and their understanding is much better. And based on that understanding, we have given there in principle approval for the demerger to go through. If you look at on our IR website, there is a kind of a pro forma balance sheets of both the demerged entity and the original entity available there. That's still a pro forma one. And because as that reduces, these numbers will continue to change. Any capital rate that happens, these numbers will subject to change. But there is a general pro forma guidance that is already given there.
Sir, lastly, on the corporate debt, which are INR 45 billion at the end of June '21, you have received INR 17 billion from Kakinada land parcel. I'm guessing this post-June '21. So is this money has been used to reduce the corporate debt further? Is my understanding right?
Yes. Some part of it is being used for reduction of corporate debt and some part is being used for investment in some of our projects which are under development, for example, the Bajoli Holi project that was the hydro project required some further investment from the corporate. So it's a multitude of end-use that has been affected on the sale proceeds of Kakinada SEZ.
The next question is from the line of Abhiram Iyer from Deutsche CIB Center.
Hello, can you hear me?
Yes, we can hear you.
Yes. First of all, congratulations on a good set of results despite the pandemic. My questions are threefold and primarily related to the Delhi Airport. One is, can you give a bit more details on the Bharti Realty deal? How it has sort of progressed from when we had the discussion last time around? Because I don't think there's been no specific update on movement since the last call. The second is, when would you expect the cash from the Bharti deal to then come in and sort of alleviate the balance sheet because cash has gone down for Delhi International Airport, while repayments upcoming and CapEx requirements are obviously still on? Is there any specific funding plan for the Delhi Airport as well? Could you just elaborate on that?
So I'll leave the detailing -- detailed answer to be given by [indiscernible]. But just generally, the deal with Bharti is on. There were certain delays because of certain approvals that volume to be received, which have not been received. And the cash flow from Bharti is expected to kick in imminently, very, very soon. GRK Babu, if you want to highlight any other aspect of it on the questions.
So, one of my thinking, we are expecting Bharti deals appeal. And as far as the DIAL funding plan is concerned, the total project cost has already been tied up through debt, what we have raised and also internal cash. And we have also had a lease financing. As of now, once the Bharti money also is a part of our expansion cash, once the Bharti money is received a lease financing side up, we may not need right now any further cash for expansion, but we are looking into further details because of the delay at this project by 1 year, 3 to 6 months, there may be an increase in interest during construction. To that extent, we may have to tie it up, that we are just -- right now, we are not looking into that, but we may look into that after about 6 months.
Got it, sir. Good to know. And just one last question. There was a hearing on the AI arbitration with respect to the fees due to the AI, which we are obviously contesting on the force majeure. Has there been any update? And when would be the next hearing?
The case was heard on 11 August. AI has raised certain points, but the court has adjourned the case, the division bench to 17 September '21. And the single judge case is posted to 28 September '21.
The next question is from the line of Atul Tiwari from Citigroup.
Sir, one more question on the corporate level, debt and other liabilities. So after the receipt of this funding from Kakinada [indiscernible], how much is a corporate debt left as of [indiscernible].
As far as the corporate debt is concerned, as of June, the corporate debt is close to INR 4,500 crores. So -- which, if you look at March, was about INR 4,600 crores with reduction of corporate debt and debt reduction, what just now Saurabh also mentioned was because we received some money from the Kakinada deal. So that money was used to repay our corporate debt. So corporate debt as of June is INR 4,500 crores.
Okay. So after -- so Kakinada money has -- coming up?
Reduced, right. That has reduced the corporate debt further, right. Yes.
Okay. So like has there been a substantial reduction from that INR 17 billion that same? Or I mean, any idea about how much of that was used to pay down the corporate debt.
So if you see this money was coming over a period of time, so we have received major portion by March itself. So in March -- by March, a major portion was utilized for debt payment and other activities, which was highlighted. So from March till June, in Q1, we received INR 130 crores. The total amount was used to repay our corporate debt.
Okay. Okay. So after June, there has not been much of a reduction, like between June and other, right? I mean, it has broadly been the same level because I thought that a bunch of that money came like in August and July. But that's not right, right?
So the number is as of June, not August.
Okay. Okay. And the second very broad question. Can you -- now that we are very close to the demerger, and if I look to notes to accounts, obviously, the holding company has given corporate guarantees for energy assets as well, some debt and some different shares, et cetera. So what is the total corporate guarantee? And what is the understanding with the creditors on that issue? Will that corporate guarantee be crystallized? Or how do you plan to take care of it? Or will -- going ahead, the new airport entity continue to have the corporate guarantee on the balance sheet?
Yes. So in some cases, we will be continuing guarantee, corporate guarantee. It is not what is crystallized because the payment is already there in place. The underlying assets continue to service those debts, right? And as those debts come off, obviously, we will be working towards reducing those limited corporate guarantees that will continue. So that is the way follow, that has been agreed as a part with the lenders. And based on that is where there in principle approvals are in place.
Okay. But just, for example, those assets where because of lack of fuel, like for example, Rajahmundry et cetera, which have about INR 2,000 crore of corporate guarantees, so if that corporate guarantee remains on the books of the airport entity, then what happens to that? Because is that asset as servicing debt and if you will not, then what happens?
Yes. Obviously, if we are unable to service the debt, the legal position will remain that the corporate, whichever is holding that guarantee, which is still on that guarantee will be liable to pay. But as I said, other than one or two, which we just now mentioned, Rajahmundry one, which is not an operating asset as of now, that corporate guarantee is continuing. But we expect that gas to start to flow. If you look at all the announcements that we have also gone to the courts that the gas should be now allocated to us. As soon as these gas plants have to generating energy, electricity, obviously they will start to service their debt and there would be a dilution in the corporate guarantee going forward.
The next question is from the line of [ Rishab Share Dalal ] from Pravin Ratilal Share and Stock Brokers.
Yes. The first question is on the annual fee front that we had to pay to airport operator of India. So this time around, we have not recorded them in our books of accounts. So if we were to record them in our books of accounts, what would that amount be?
Yes. The amount that we have not recorded in the current quarter is about INR 201 crore. And the previous quarter is about INR 336 crore.
Okay. So on an annual basis, would it come on the like INR 800 crores to INR 1,000 crores that we were to pay to AI?
Yes, it depends upon the total turnover of the company. Yes, the last year, the total amount was about INR 750 crores. This year, as the traffic goes up and the business is good, it could be around INR 800 crores to INR 900 crores.
Okay. And the second question is on the Delhi Airport front. So we have a lot of land parcel along the Delhi Airport. And as a company, we also plan to utilize that land. So what -- how much land are we going to sell in this quarter to properly utilize it?
So there is no plan to sell any land in Delhi Airport during this quarter of this fiscal year. Last year itself, or actually last year, we had already, through an auction mechanism, monetized development exercise of about 10 million square feet in 2 different phases, 5 million in first phase and 5 million in second phase. And in that open auction, Bharti was the best bidder. And we have the right at this stage to build out commercial spaces in Delhi Aerocity. But during this year or going forward on an immediate basis, we have no plans to further monetize any of the land parcels in Delhi Airport.
Saurabh, there may be one land parcel which is a similar resource, which we have taken back in hospital [indiscernible].
Yes, that's more of adjustment. You're right. Please highlight.
Yes. There is another 5-year cost of the land, which was taken back from the [ Silver Resort ] because they did not pay the fees. Through court process we have taken back that land parcel. That is likely to come back to the market in this financial year. And maybe we are looking for another 4 or 5 years because of monetization before the [indiscernible]. That is what the as of today plan.
Okay. And one more question on the demerger plan. So we have admitted -- the scheme has been filed with NCLT on 5th of March. But when is the next hearing date for NCLT? And why don't you announce such dates on your -- as your corporate announcements on BSE and NSE as a part of good corporate governance?
Well, honestly speaking, the date has not been announced by NCLT. So how can I announce it on my -- on the NSE and BSE?
Okay. No, but -- at present we do mention that you expect to even receive the order by the end of Q3 FY '22. So I'm sure that presently, we are in Q2 FY '22. So maybe we are expecting a date to come very soon? Or are we not?
Yes, we are expecting a date to come very soon. And as soon as that date is announced, we will be informing the stock exchanges. There's no two [indiscernible] about it. So we have to go as per the -- as per the pleasure of a judicial court. I cannot predict and presuppose what date they are going to announce. We are pursuing the matter. We have filed application with NCLT for an expeditious hearing. We have agreed to hear it on an expeditious basis. Hopefully, I think next week there will be some movement on the -- by the court to give us an appointed date. As soon as we get it, we will surely let the markets know.
Okay. Okay. Fair enough. And just one last question on the Kamalanga order that you received on the 6th of August. So what is it exactly about? And what is the expected amount that we will receive from that?
Ashish, sir?
Yes. Basically, this order is regarding cost pass through, as you would know, when India had shortage in coal supply. There was a presidential directive long back saying if the shortage in supply is there and the power producers to meet the CPA requirement at white coal from the market, the incremental coal cost would be passed through. So while in our case, there was this added aspect that we had the share of the captive coal mine, which also got canceled. So while we got an order, the cost of coal incurred to build the gap of this captive coal mine supply not coming was not cleared by CERC. It's the long interpretation connected orders, after that laid down the principle, CERC that interprets current coal needs challenge that and that has upheld our challenge, which means that we would be able to reimburse -- get reimbursed the entire coal cost differential, including the carrying cost. This has already been booked in revenue, but the impact would be of the cash flow in terms of amount, while it is being reconciled, it will be INR 150 crore plus.
Okay. So we do expect to receive INR 150 crores from this order, is my understanding correct?
That's very correct. INR 150 crore plus.
Okay. And just one last follow-up. Just one last follow-up on the Delhi Airport -- on the annual fee portion of the INR 200 crores that you said that we have saved by not providing in the books of accounts. And you do mention on your Slide 18 of the investor presentation that we use the cash that comes out for additional resources for the current operations. So where are -- where is this INR 200 crores being exactly used, if you can just highlight some points on that?
The funds are being used, we have not kept anything separately as the funds. The whatever amount of collections that we have, entire amount has been utilized for our operations simply. So there is no specific head that has been used, but entire cash has been used for our operations.
The next question is from the line of Apoorva Bahadur from Investec.
Sir, I wanted to understand a couple of things. Firstly, I believe as part of our deal with ADP, we were supposed to receive INR 10 billion as earn-outs on achieving EBITDA milestones. So based on this FY '22 run rate so far, do we expect to make this milestone for the year? And this is the due amount?
Yes. So we are expected to get about INR 1,060 crores in totality as cash earn-outs. And this is divided into 3 years. So we will not get the full INR 1,060 crores this year if we achieve those milestones. Every year, it will be tested with the EBITDA that is achieved for that respective year and then that earn-out will be determined. As on date, we expect a part of that earn-out to come based on the current trend lines that we have for this current fiscal year.
Okay. And this trend line is adjusting for the amount which is under litigation for the [ AAIC ]. Am I correct?
Again, if you can -- mistake...
What I meant is in the unfortunate event if we do not get that AI litigation our way, so currently, we're not booking a part of the revenue share. And if you have to reverse that, even then are we eligible for the amount?
We have to test it at that particular point of time. As on date, yes, as I said, even if we work with just that we will achieve our earn-out. But we really cannot give a full guidance because there is always a possibility of a third wave and some impact coming to play. So real uncertainty over there.In our belief, with respect to our litigation on the force majeure, we are in a very strong footing. I would urge you to read the OMDA. The OMDA very clearly states that it is at the election of the concession entity. It's not dependent upon an agreement that is to be agreed by the government or by the regulator or AI over here. It is at this selection and from purely from any judicial starts, the sense that is being put up by the airport authority is not look at law. So -- but we actually can't decide for any article authority or a judicial authority whether and when that decision comes, it will be cleared at particular point of time.
Right. And sir...
Actually -- sorry, I also want to highlight, you see last year, the government itself has declared force majeure conditions, right? So after declaring force majeure conditions, they cannot go back on their own declaration. So I just wanted to highlight that aspect also.
No, makes sense. And when during the year is this cash expected to be approved for this cash earn-out? It's typically -- I believe it will be at the end of the year FY '22?
Yes. It will at the end of the fiscal year. The accounts will be drawn up, EBITDA levels that have been agreed will be tested. And then the -- that earn-out which is accrued for that particular year will be paid out. And it is also a range. So it's not that -- it's not digitally 0 and 1. So if it is within that range, and actually you see 70% of -- within that range, you give 70% of the cash that is supposed to accrue to you.
Okay. And currently, you're meeting the 100% requirement?
Currently we are, but let's keep our fingers crossed. And that we are meeting -- we are currently primarily meeting because of the MAT this dispensation.
Right, right. Sir, on the AIC front, how much is the total amount which is under litigation? I believe INR 200-odd crores this quarter and the INR 330 crores previous one and I think the first quarter is I think INR 1000-odd crores?
No. It is -- till June it is about INR 537 crores. And July and August all put together, maybe around INR 700 crores.
Okay. Okay. Fine. On this, so you mentioned that at Hyderabad we have entered into a realty agreement with Boston Living. Can you share how much should be recurring income on this?
It is a license fee concept where the airport operator will get our money in [ abstract ]. The valuations, I don't have exact number. We can let you know. Otherwise, on a year-on-year basis, it will be a nominal income.
Okay. Okay. So it will be upside billing also?
Yes, yes.
Fine. Sir, also I wanted to know on this PT GEMS doing quite well over there. Obviously, the coal price support is very, very strong. We have roughly around $150 million in dividends over the last year and this currently. How do we intend to use that cash? And where can we use that cash? Can we bring it to India? The [indiscernible] tax is quite high if I'm not wrong?
So the investment in PT GEMS was also a leverage investment. So we had taken an offshore loan -- or our subsidiary offshore had taken a loan to put that investment, because almost $500 million. Today, that number is down to about $250 million. Primarily all the dividend proceeds that come are going towards servicing the interest and principal payments of that loan. That's the current usage. But we expect, given the trend lines that we see and the agreement with our majority partner, there is to maximize dividend flows to the -- both the shareholders. We expect that actually surplus cash to start accruing to us next 2 to 2.5 years. We are also working towards actually refinancing that loan to see if we can term out that liability through an international bond issuance that we are trying to evaluate. Nothing concrete right now. But that is something that, given the current momentum in the debt capital markets all over the world can we do something at that time, that is also under evaluation. So if we succeed in that, then there'll be a decent flow of dividend coming back to the corporate. But it's a very valuable asset PT GEMS as an investment. And we feel quite good. We have been patient for its performance to start flourishing. And as you've seen over the last 12 to 18 months, we can see very good trend lines, and these trend lines are -- honestly speaking, will continue to improve given the demand that we have from China and other emerging markets, developing markets and also the spat between China and Australia, where China is not procuring its contracted supplies from Australia. So given these trend lines, there is buoyancy as far as this business is concerned.
Right. Sir, if I'm not wrong, we are looking to monetize this in last quarter. So any progress on that?
No progress as of now. We always are open to any suggestions, any offers, but nothing concrete has been raised so far.
Okay. Got it. So one last question, if I may. And this is on the government's cap on air capacity. So if there were to be no cap, how do you see the recovery emerging?
Well, it will be much faster. It will be much faster if there is no cap on capacity, and there is no cap on pricing. You see that will allow more aircraft to fly, ATMs will go up. Dynamic pricing, people will, of course, seek the best price. People who plan well in advance should pay a reasonable amount and people who are last-minute travelers would pay a higher amount. So I think while the government has opened up capacity, bringing it up to about 72.5%, I think personally our take is that they should remove the cap on the capacity.
The next question is from the line of [ Shree Chandni ] from Shree Capital.
Yes, am I clearly audible?
Yes.
Yes. So this question is regarding progress in Goa Airport. As per earlier communication, you mentioned that the Goa Airport is ready to be scheduled by August 2022. But as per your latest presentation, there is going to be 1% progress each month from May to June and then to July. That is from 33% to 34% and then to 35%. Total 65% is pending. Are we try to concentrate in the next 12 months?
GRK Babu, you want to highlight about the monsoons in Goa?
Can you repeat?
So yes, I hope you know that the intensity of monsoons in Goa is quite big, quite high. Yes. So during this period of time, usually, you do not have much progression on the construction activity. But as soon as the monsoon starts to subside, then we have -- construction activity will pick up.
Yes. My second question is, we have approximately 1,700 acres land in Hyderabad and Delhi Airports. And if I'm not wrong, we are operating these airports from around 10 to 15 years. You mean to say that this land is vacant from 15 years without utilizing and then the land lease is going to expire by 2068. Means we waited 15 years of time, is my understanding right?
No, your understanding is absolutely wrong. You're absolutely right from the time aspect of it. We have another 50 years, 55 years to monetize the land and earn these rentals from it. But real estate is not a commodity business. Real estate is a business where you have to work hard to make the land mature before you start to monetize, and it takes time to create mature parcels of land. That's why these are very long-cycle businesses. Investors who really make big money in real estate are not public market investors because they are very short -- they are at the very short end of it. They look at only next few quarters of earnings. But when the asset matures, then it makes great sense for them. Private investors make much more money because they have patient capital to look at 4 to 5 years tenure on any real estate development. So as we speak now, our strategy was more as a landlord in Delhi. We leased out a land and earn lease rentals out of it. Now that land has matured and hence, in the next round of monetization, you're seeing much compelling values coming to Delhi Airport. So to Hyderabad Airport, all the Hyderabad Airport is still behind the curve as far as creating a mature land parcel over there, but that is slightly ahead. In the next 10 years study, we will see most of these land parcels being fully developed. And that's where the next trend line of your earning of lease rentals will be [indiscernible] in large quantities.
Okay. And my third question is during GMR and AVPD, if I'm not wrong, in one of our investor presentation, you mentioned that ADP has an access of getting loans at a rate of 1%. And subsequently, we will also get access to keep the funds. Why are we still raising capital at high interest rate?
Well, I'm sure you also know that ADP is also an airport operating entity, correct? And their airports, especially the main airports in France have also shut down during the current pandemic. In these circumstances, no management will give out loans when their own house is burning. So first they will stabilize their own businesses and then look at expanding or allocating more capital to their other businesses or subsidiaries or joint ventures. So as on date, if you look at last whole year of ADP, they were at a much worse position. They also had to raise substantial amounts of capital in the debt capital market. I think if my memory corrects me -- is right, we had raised all those EUR 5-odd billion from international capital markets just to maintain their own liquidity levels in shutdown airports, right? But as a management, they give out a loan when they're -- when certain need of liquidity? No. But yes, in normal circumstances, that was an agreement, and we stand by that agreement. If tomorrow the COVID conditions a bit and traffic is rolled out in normal circumstances, our strategic relationship, these agreements that we have with them will be surely [indiscernible].
[Operator Instructions] The next question is from the line of Mohit Kumar from DAM Capital.
So only one clarification, what is the status of Goa tariff or -- sorry, Hyderabad tariff order? Hello?
This is the operator. Mr. Babu, please go ahead.
Am I audible?
Yes, sir, you're audible, yes.
Okay. So as far as Hyderabad is concerned that consultation paper has already come out. So the -- all stakeholders have given their views. So we are expecting the end of this month the final tariff order of the Hyderabad.
The next question is from the line of Atul Tiwari from Citigroup.
Sir, can you -- the second part of the question about the corporate guarantee that I wanted to find out, was I did see the pro forma balance sheet on the website. Is this a good idea about the shape of the balance sheet of the airport entity. But any idea about how much -- what is the size of corporate guarantee that the airport entity will have given to the net from the non-airport entity? And out of that corporate guarantee, how much is for the assets which are operational and how much is for the assets which are not operational as of today?
I think the right time for that question would be once we have the demerger order after the court has given full consideration to the petitions made by all the financial creditors. I've given some insight into that there will be some guarantees that will be continued like Rajahmundry 1. But majority of them will not continue. And -- but we have to wait for that period of time for me to give you a much accurate and firm answer on that.
The next question is from the line of Apoorva Bahadur from Investec.
Just continuing with the previous question, I'm sorry if I'm hopping on the corporate validating. But just wanted to know this Rajahmundry 1 variety, will this be at the GMR airports level? Or will it be at GIL level?
So again, there are 2 entities that will be formed in the demerger. One will be GIL and other will be GPUIL. You will see it on our website and also in our presentation with the 2 entities that will emerge. Both entities will be giving the corporate guarantee for any loans that are residing into GPUIL if it is to be given. Okay. At a point of time, the guarantees from GIL level, which is the airport entity, that will follow up. And that is where we are continuously working with our lenders so that as the levels of debt comes down, they are able to remove that contingent liability on the airport side of it. But with respect to Rajahmundry, which is what I highlighted earlier, currently it is a plant which is mothballed, right? It's not an operating plant. But as soon as it starts to operate and starts to generate cash and reaches a good level of operations, automatically guarantee -- not automatically, but we are in dialogue with the banks from a principle perspective that that guarantee will then get dropped off and GPUIL guarantee will continue.So these are very early days to talk about specifics. Let the scheme get notified. I can't -- I can't predict and give you a wrong trend line. I'm just giving you an insight into it.
Ladies and gentlemen, we will take the last question from the line of [ Rishab Shah ], Praveen Ratilal Share and Stock Brokers.
Just one clarification from -- correct me if my understanding is wrong, but you said that the -- as far as the case regarding the annual fee to AI that is pending in Delhi High Court is concerned, you said that the 11 August hearing is adjourned. And now it is on the 21st of September. Is my understanding correct?
Yes, correct. Your understanding is correct. Actually, the Delhi High Court single judge actually have given on 5 January 2021, a stay order from payment of annual fee. On that Airport Authority of India has gone to the division bench for appeal. That is what the hearing is postponed to the 17 September, 2021.
Okay. Okay. And just one more question, again, on the annual fee front only. So you said that the amount that is under litigation is roughly close to INR 500 crores. And as far as our payment, that if an outgo comes, then it will be close to INR 800 crores to INR 1,000 crores. So is it fair to assume that the remaining part of that INR 800 crores, so that at least like INR 250 crores to INR 300 crores, that will come in our books of accounts at a later part of the financial year?
See, the annual fee is payable on month-on-month basis basing on our turnover, that is the 45.99%. So what we mentioned was till the last quarter, the amount not paid was about INR 236 crores. In the current quarter, June quarter it's about INR 201 crore. So because of the stay that we are having, we continue not to pay, so the amount continue to accumulate. So what will be the final amount depends upon when the case will get closed, but estimate is by March, it could be including the last quarter of the last financial year, this can be around INR 1,000 crores, INR 2,000 crores.
So entire amount will be under litigation only, right? So if we were to pay, then we'll have to pay a full amount. And if we don't have to pay, then we don't have to pay a single rupee. Now is the understanding correct?
That's correct. If the case is disposed of, so that the thing is now Delhi High Court role is limited to a stay order only. But there is a final payment, there is a tribunal which has already been constituted because it is a dispute that AI has raised. When we said, as Saurabh has already explained, that under force majeure clause, either of the parties agreement is entitled, the word is "entitled" to speak waiver of their obligation in case of force majeure. So we have stopped the waiver. But AI has agreed that there is a force majeure. But they say we will not agree for a waiver, we'll say only defer. That's where dispute has come. That dispute has already been referred to a tribunal. Tribal has already been constituted with the 3-member retired Supreme Court judges. They have started hearing already the case, they have already filed our statement of the claim and statement of different [indiscernible] in the year. That is what they will decide finally, whether we are entitled for the waiver or we are entitled for the defer.
Okay. Okay. So I guess the amount of INR 500 crores is coming from the fact that in the last quarter, it was roughly INR 300 crores. And this quarter, it is INR 200 crores, so under litigation, at present, it is INR 500 crores, right?
That's that.
Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Saurabh Chawla for closing comments.
Thank you. Thank you so much, everybody, for joining our quarter 1 call. We are available offline. You have the contact details available with you to reach out to Amit and his team. And any questions that you may have, we can answer them offline. Thank you so much. Be safe, stay healthy. Thank you.
Thank you. 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.