GMR Infrastructure Ltd
NSE:GMRINFRA
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Ladies and gentlemen, good day, and welcome to GMR Infrastructure Limited conference call to discuss Q3 FY 2022 results. [Operator Instructions] Please note that this conference is being recorded. We have with us today Mr. Saurabh Chawla, Executive Director, Finance & 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 the conference over to Mr. Saurabh Chawla for the opening remarks. Thank you, and over to you, sir.
Thank you. Good afternoon, ladies and gentlemen. Thank you for joining the third quarter fiscal 2022 earnings call. This is the first call of a demerged GMR Infra as a pure airport entity in the Indian capital markets. Hope all of you are doing safe and doing well. To begin with, I would like to make some comments as far as economic recovery is concerned. As you are aware, economic recovery broadened in Q3 FY '22, and the business activities picked up pace post the effect of the second COVID wave. Substantial vaccination of the population, coupled with the easing of COVID-related restrictions, aided the economic activity. However, as you know, the third COVID wave hit India towards the end of calendar year '21. Although cases surged in mid-January '22, the severity of the infection has been limited. However, the cases have also started now to recede rapidly from its recent peak of about 0.35 million cases in early January '22 to about 0.07 million cases as of February 8, '22. As per experts, India is now much better prepared to cope up with the COVID waves going forward due to a significant part of our population being vaccinated, resulting in lower hospitalization and mortality numbers. As such, economic impact of the third wave is also expected to be very limited as compared to the previous 2 COVID waves. Before briefing you on the business performance, I would like to highlight the following key points. Firstly, following demerger scheme coming into effect from December 31, 2021, GMR Infrastructure Limited or GIL becomes India's first and the only listed airport company. We are now well poised for the next leg of our growth, having built our expertise in the entire airport value chain. GMR Airports vertical has uniquely diversified beyond the airport development and operations. It's developed towards high-growth potential of asset- and capital-light businesses of adjacencies or airport ancillary service operations. We started out as an airport operator and have, over the years, not only increased our airport portfolio but have also built expertise in the airport ancillary business operations by entering into joint ventures and partnerships in the businesses of duty free, carpark, food and beverage, advertising, promotions, cargo, et cetera. The partnerships have helped us to develop capabilities and understanding of the airport ancillary businesses as well as understanding of the non-aero commercial businesses at the airport. It has now enabled GMR Airports to leverage its expertise and experience to independently operate ancillary airport businesses. We will strengthen the GMR airport platform as we build and scale ancillary business platforms. We will scale the platform presence across our own network of airports and also expand presence to external and open market opportunities. We have, in fact, operationalized the new opportunities. For example, GMR Airports has won a non-aero master concession and cargo business bids for the upcoming Goa Airport. It is also -- will be operating duty-free business at the Kannur International Airport. GMR Engineering & Management Services won an IT infrastructure bid for an airport in Kuwait. Secondly, GMR has signed a shareholders' agreement with Indonesia's Angkasa Pura II for the development and operation of Kualanamu International Airport in Medan, Indonesia. The project scope includes operation, development and expansion of the airport over a period of 25 years. Kualanamu International Airport is an operating airport with healthy cash flows. The project marks GMR's entry into the fast-growing Indonesian aviation sector, the largest in ASEAN and a high potential market. Our commitment is to transform Medan Airport into our Western international hub of Indonesia. We are seeing visible signs of fast traffic recovery. Third COVID wave hit India from the latter part of December '21 and had an impact on the domestic traffic. However, the impact was significantly lower than the first 2 waves. International traffic, on the other hand, has not got impacted as much compared to the previous waves. Recent traffic data suggests that the third wave impact on traffic is waning. For instance, the daily average pax at Delhi Airport and Hyderabad Airport have turned around and has reached 58% and 56% of the pre-COVID level during the week ended February 6, '22, respectively, as compared to 43% and 49%, respectively, during the week ended January 23, '22. International daily average pax at Delhi Airport and Hyderabad Airport reached 47% each during the week ended February 6, respectively, as compared to 42% and 45%, respectively, during the week ended January 23, '22. The data indicates that the traffic seems to have bottomed out and is recovering rapidly. Cargo traffic remains resilient and is unfazed by multiple COVID waves. Preceding data indicates that the traffic is expected to bounce back quickly as COVID third wave is unlikely to be economically disruptive. We are seeing similar traction in the previous 2 waves even amidst restrictions in the airline capacity by the government. We anticipate domestic traffic to reach pre-COVID levels in fiscal year '23 and international in fiscal year '24 in our airport -- in our Indian airports, mainly driven by decline in COVID cases, rise in vaccination. As you are aware, cumulative COVID-19 vaccination doses have crossed 1.7 billion doses in India. Over 75% of the adult population in India has already been administered second dose. And over 52% children of 15 to 18 age growth have been jabbed so far. Globally, too, significant parts of the population of various countries have been inoculated with at least 1 dose. For example, U.S. has reached a level of 75%; U.K., 78%; Canada, 86%; Germany is at 76%; France, 80%. Overall, 63% of the global population has received at least 1 dose. Various countries have also started administering booster doses to make the protection from COVID even stronger. This will aid passenger confidence to travel. Easing COVID-related restrictions. Scheduled international operations are still restricted by Indian government till February '22, and the entire international airline operations from India is functioning through the air bubble arrangement. Currently, air bubble arrangements are with 35 countries. However, various countries have started to ease and remove COVID-related restrictions with the U.K., in particular, removing all COVID-related restrictions and similar steps are also being taken by other countries in Europe such as Norway, Netherlands, Ireland, et cetera. The Asia Pacific region has also started to open up for travel for vaccinated passengers and traffic has begun with key markets, including Singapore, Australia and Hong Kong. Government of India continues to track these developments and it is expected that they may consider allowing scheduled international operations in the near future. Further, even on the domestic front, statewide restrictions in air travel have eased substantially with indications of further easing. In addition to this, fleet additions by major, well-capitalized Indian airlines, especially with takeover of Air India by the Tatas and entry of new airlines, including that of Akasa and Jet Airways will further improve the traffic scenario. Lastly, we have made significant progress in our CapEx programs. Delhi, Hyderabad and Goa Airports have achieved 53%, 69% and 54% completion as of December 31, '22. In Goa, as of January 31, '22, we have achieved 60% of the CapEx programs and the airport is expected to be inaugurated during August '22 in a phased manner. I would also like to briefly touch upon the best practices and recognitions received on the ESG front. Delhi International Airport has been reaccredited by the Airports Council International, ACI, Airport Health Accreditation program. AHA validates airport's health measures, implement practices that align with ACI aviation business restart and recovery guidelines and provide reassurance to passengers whilst demonstrating the airport's commitment to public health and safety and grants industry recognition for excelling in safe hygiene practices. It was a proud moment for GMR that Mr. Videh Kumar Jaipuriar, CEO of Delhi Airport, has been declared as an International Airport Review Person of the Year. The competition was stiff with over 17 global nominations for the award, which finally got shortlisted to 10-odd people. Hyderabad Airport was awarded the Certificate of Merit at the National Energy Conservation Awards 2021. It was also awarded with the prestigious Excellency - Gold Award in the Telangana State Energy Conservation Awards of 2021. The ACI result for Hyderabad Airport stands at 5.0 for quarter 3 fiscal year '22. The presentation of -- with all financial numbers are already available to you. If not, it can be downloaded from the Investor Relations section on our website. We're available to respond to your questions on this call and off-line post the call. Now I would like to open the forum where my colleagues from the airport sector and specific airport assets and airport corporate can answer your queries. Thank you so much.
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.
Congratulations on the demerger. So my first question is, what is the status of arbitration with Airport Authority of India? Can we expect the normal service to resume from FY '23 onwards for revenue sharing? That's the first question, sir.
G. R. K. Babu, you would like to take this question, please?
Yes. As far as arbitration is concerned, it is going on and now the dates have been finalized for the month of May for the purpose of cross-examination as well at the final year. We can expect the final outcome from the tribunal maybe in the third quarter of this calendar year. As far as the revenue share payment to the Airport Authority of India going forward, we would look at it that if we had reached the pre-COVID level operations by March, we may consider. But as of today, no decision has been taken.
Understood, sir. Secondly, sir, can you please explain the new arrangement with Bharti Realty? And how does it affect our accounting for this quarter?
No. There is no, I mean, impact in this quarter. Whatever impact has already been given in the last quarter. The Bharti transaction is 4.98 million. Out of that, 2.78 million has been now -- they have taken over and they are paying the entire money. I think we have explained in the last call. So almost about INR 1,100 crores money has been received, including the annual license fee. For 2.78 million, the annual license fee is about INR 204 crores as fully received for 1 year on -- at the first -- end of September. That has already been accounted for. So this quarter, we have accounted proportionately for [ 3 ].
Understood. Lastly, on FCCB. In the presentation, you mentioned that the FCCB amount is INR 1.4 billion. Is the amount correct, right? And what is the conversion price of the FCCB? Is it similar to the -- are the arrangements similar like earlier? Or is there some change?
[ Ashok ], you want to take this on the FCCB? I think Ashok is not there.So quickly, I think the FCCB amount was $300 million, which in the demerger has been allocated $25 million to the airport sector and $275 million to the non-airport sector. As you are aware, prior to the demerger, the conversion was at INR 18 per share. So it is substantially in the money. And the conversion has to be simultaneous. That is, that the FCCB holder has to convert both sites at the same period of time. At this stage, GPUIL or the demerged entity of the non-airport assets is yet to be listed, which would happen by end of February. So it will become very clear as to what are the pricing of both sides on the demerged entities and the holder can convert it at that particular point of time. Last but not the least, because it is deep into money, the issuer also has the right to force the conversion of the FCCB, if required. Having said that, we are always in touch with our key stakeholders. The holder, which is Kuwait Investment Authority, has been one of our most supportive investors and we will do whatever is in the best interest of the company and of the investor.
The next question is from the line of Atul Tiwari from Citigroup.
So post this demerger from GMR Infrastructure, how much of the demerged entity's debt and any other liability has been guaranteed in terms of the contingent liability?
So these are historical agreements that were in place. The broad contours would be that the continuing contingent liability would be about INR 3,000 crore to INR 3,500-odd crores going forward, which -- where the loans have moved to the new entity, which is GPUIL , whereas there is continuing guarantee from GIL. Having said that, if you look at some specific cases. For example, one of the continuing guarantees towards the acquisition finance taken many, many years back to acquire 30% [indiscernible] mine in Indonesia. That was an acquisition finance done for about $500 million. Today, the exposure -- the bank exposure over there is only $160 million. And the coal mine is doing extremely well. The current coal prices are quite buoyant. Every year, we are getting about USD 100 million to USD 120 million as dividend flows on our 30% from that mine. Over a period of time, this exposure is going to reduce down to almost 0 in next 12 to 18 months. Having said that, we are in the process of refinancing this particular facility. And in a short period of time, the guarantee given by GIL in the refinancing process will also get removed. There are a few such instances, which are there, which, honestly speaking, do not have any cause of any credit concern on GIL 1. But because these are historical in nature, over the next 6 to 12 months will get removed either through divestment processes or refinancings that happened on some of those financings.
Okay. So just to understand clearly, so the total contingent liability cash guarantee from GIL is INR 3,500 crores. And most of it appears to be on account of this one item, a $500 million acquisition they had taken at one point of time to finance the Indonesian asset and anyway that debt is running down. So once that debt gets phased fully, there will be no contingent liability? I mean nothing substantial, right? I mean, is that understanding right? Because $500 million is almost INR 30,500.
No. I think you misunderstood. I had given the example of $500 million, which was a debt taken almost 10 years back to acquire that mine, 7 years back. Currently, that $500 million is down to $160 million, which I told you. So the contingent liability only remains $160 million. Similarly, there are 1 or 2 other financings in total, as I said, would be around INR 3,000 crores to INR 3,500 crores, which are there. These are assets, which are well into money or have cash flow supporting those exposures, and hence, in the refinancings, will get removed over the next 6 to 12 months. That's what my indication to you.
Okay, sir. And sir, final question. Will it be possible to share the breakup of consolidated between the Delhi Airport, Hyderabad Airport, Goa Airport, which is under construction and other assets and the corporate debt?
Atul, this is quite possible. You can always contact us. But broadly, if you look at the total debt today, as of December in GMR Infrastructure is INR 20,000 crores. INR 18,000 is put together in airport and the remaining is corporate. So this is a broad breakup. The nitty-gritty details, you can always contact the team and information can be provided.
Okay. That is net debt?
Basically.
The next question is from the line of in Apoorva Bahadur from Investec.
Congratulations on completing the demerger.
Excuse me, Mr. Bahadur. Sorry, sir. There is an echo coming from your line. Please check.
I'm hearing it quite okay.
No, sir. There is an echo coming from your line.
You'll have to then dial me in again. I -- or dial me into my mobile. I have nothing opened right now over here.
Okay now?
Okay. That's good.
So at the beginning of your comments, you highlighted that we are now looking to go big in the airport ancillary service business. Sir, if I recollect correctly in our previous calls, we never really touched upon this. So just wanted to know what has changed? Or why this change in tactic? And what sort of an opportunity size do you see over there? Are you there?
Shall I take it all or...
Yes, yes. Please, please take it.
The adjacencies business concentration has been there for a quite long time. But we have not been able to -- I mean, we were not fully doing it. Now the concentration of GMR Airports Limited is to develop the adjacencies in airports as well, especially other area of concentration for, one, is duty-free; other one is the cargo, third one is a carpark, fourth one is a master concession. These are the 4 areas identified by [ build map ] and where we wanted to do concentration. And for example, in case of duty free, we have already started operating Kannur duty free outside [ GMR 2 ]. And as far as the master concession cargo, recently, Goa has gone for a bidding and where GMR supposedly has bid and won the master concession of the non-aeronautical revenue as well as the cargo. So our endeavor is to develop all these businesses as BUs within the GMR Airport Limited and the 2 and develop these one as separate line of businesses apart from the airport operations.
Okay . Fair enough. And you see what -- would you like to put a number to this opportunity size over here?
The number of the opportunities, the numbers are not very big as of today. For example, maybe the Goa non-aeronautical revenue, the master concession and the cargo may grow in the full year of operation is about INR 100 crores.And going forward, and for example, in case of the duty free of the Kannur is doing about INR 23 to INR 32. But as and when the opportunities are coming up including the DIAL and [ GHIAL ] we wanted to build these businesses and operate as BU, a separate line of expertise by the [indiscernible]
Okay. Just to comment over here. So far, these adjacencies are planning below the concession entities, right? So Delhi will have its own, Hyderabad will have its own. What we have decided that we should do these businesses at the holding company level, which is GMR Airports Limited. That allows us much greater flexibility in our businesses, and as these businesses get scaled up, it also allows us to go to an offer and bid for third-party businesses. Previously, because these were housed within the concessions, that flexibility was not available. Now this is available. The market opportunity is huge. All that we are demonstrating right now to you is that the confidence level is high. We have learned the ropes of this business, and hence, we would like to make these businesses also on a global scale. That's the guidance.
Okay. So these will be at GIL level and not on GAL level?
It will be at GAL level not that Hyderabad level, or Delhi level, or Goa level. It will be at the GAL level.
Okay, okay. Very helpful. Sir, in your comments, I think, you had a response to a question corporate guarantee contingent liabilities. You said that a large chunk will follow up over the next 6 to 12 months either structured refinance or [indiscernible]. My understanding is that INR 2,000 crores of this relates to Rajahmundry guarantee. So is there any possibility or any progress on monetization or possibly sort of exiting that asset or ...
Yes. So the guarantee is about INR 1,000-odd crores for Rajahmundry. Having said that, there is a lot of traction as we speak with some of the divestment initiatives that we have taken. A combination of sale of equipment and land is also another possibility. So work is moving ahead quite well. We are, of course, also awaiting some of the new guidances from the government of India with respect to a combined tariff or for gas-based businesses and renewables like solar that will add further potential to such divestments going forward. So things are moving ahead. And as I said, you should see substantial visibility of many of these transactions between next 3 to 9-odd months. Earlier, my indication was between 6 to 12 months, but some of these will happen even faster.
Okay. Sir, also now that the airport business is separate and probably 2 to 3 years down the line it will quite a cash flow-accretive, would you want to come out with a dividend policy, so that -- I mean there's clarity for the minority investors as well how GMR Infra will go about distributing profit?
You're absolutely right. As we look forward over the next 2 to 3 years in some of the airports, there is going to be a significant amount of cash accretion and significant amount of free cash for equity. We will be coming out with a dividend policy. Having said that, as you are aware, there is one more strategic action to be taken, which is with respect to the reverse merger of GMR Airports with GIL. There is still 1 layer in between, which we would like to remove, which in our agreements with Groupe ADP will be undertaken in fiscal year '25 after the testing of [ projects ]. So by fiscal year -- by end of fiscal year '25, GMR Airports would have reversed merged into GIL, and hence, that layer would also get removed. And by that time, Hyderabad and some other assets should start showing good amount of free cash, and hence, that would be the opportune time for us to announce our dividend policy for the shareholders of GIL.
Okay. It's great to hear that. Sir, just one last question, bookkeeping one. There are quite a few one-offs in the non-airport business under, I think, the discontinued ops like in energy and other businesses. So can you please highlight what do they pertain to?
Can we please stow that conversation for a later date when we talk about non-airport business. It's going to be listed soon, so we will talk all about what those one-offs have been. Let this conversation be on the Airport side. Now that it's a pure airport entity, let's talk about airport.
The next is from the line of [indiscernible] from Barclays.
Congrats on a good set of numbers. My question is a follow-up on Bharti Realty that was asked earlier. So if I recall correctly, you mentioned that the contract with Bharti Realty not been adjusted. But in your presentation, it says there has been some adjustment. So if you could show some light on that? And secondly, based on the figures, I think you mentioned there is no drawdown debt from that transaction. So I guess, if you could answer is how much is currently outstanding from Bharti Realty?
G.R.K.
Okay. That is pertaining to the amount which we have reversed Bharti is pertaining to the '19/'20 amount, which we have recognized as income in the financials. And because of the delay in the contract, the payment has been received only in September. The amount of revenue recognized in '19/'20 has been reversed. That is the only one of the items, which is the show as reversal. As far the Bharti transaction is concerned, the 4.98 million square foot-plus transaction is divided into 2 parts, 2.78 million and 2.17 million. 2.78 million, entire full payment has been received by 30 September 2021 and accounted for in the books. That means almost the RSD, ADC and one layer of the new [ rental ] annual license fee has been fully received and accounted. So there are no dues from Bharti as of today and that amount has been issued -- whatever the amount that has been agreed upon entered into agreement and handed over. The second phase of 2.98 million that is 2.16 million, that will be effect to -- that will be taken over by Bharti between April 2023 to September 2023. They are bound to take it over. During that period, we'll get the balance payment pertaining to that land parcel. Is it clear?
Yes, sure. And how much approximate amount would that be?
If you consider in 2023 April, the balance 2.16 million square foot, both the ALDs -- I mean the RSD plus ADC plus full license fee [indiscernible] will be around INR 1,000 crores. INR 1,000 crores will be there.
Okay, sure. My second question relates to average tariffs. So with regards to your CPs with Airports Authority, could you give us some sense of how much is the year-on-year increase in average tariff for this year compared to the last year?
The tariffs are already implemented as far as the Delhi is concerned, which are under base airport charges. There is no increase as far as base airport charges are concerned. They're the same number till 2024, March because this is the third [ control ] tariffs. But when it comes to the Hyderabad Airport, which has been now implemented. From 1st April 2022 onwards, the tariffs will jump. That will be currently INR 209 yield per passenger will go up to INR 430 per passenger. Thereafter, it will keep going up a substantial amount. So that is clearly provided in the tariff. That is not a percentage amount. They have clearly defined how much is the UDF will go up year after year. So that has been provided very clearly. But currently, '22, '23 it is going to be INR 430 yield per passenger as it is INR 209 currently we are charged. It is more than 100% jump will come next year.
The next question is from the line of Mohit Kumar from DAM Capital.
So in the Slide #25, you are given the 9-month FY '22 consolidated EBITDA breakup for the, is it -- do we have the similar number for FY '20 pre-COVID?
Mohit, for all these numbers, you can directly contact us. This will be very helpful.
Sure. What is the capital expenditure you expect toward FY '22 full year and FY '23 and FY '24? is it possible to share the number?
So all these data points, specific data points, whatever you need, you can always contact us.
The next question is from the line of Aditya Mongia from Kotak Securities.
I had a few questions from my side. I'll go ahead. The first question, which I had was on the contingent liability. Just wanted some clarity that post the rounds of refinancing that you were suggesting, let's say, 12 months underlying, how much of the contingent liability will still be there?
Just to again clarify, I'm not suggesting that it can be done 12 months down the line. I'm saying it will be all completed within next 12 months, so number one. Number two, in the next 12 months, we expect 0 contingent liabilities going forward. That is what our expectation is.
Understood. That clarified. The second question that I wanted to ask was to my response with Mr. Babu now INR 430, which is the yield for Hyderabad for the first year, which is FY '23, is it going to be static? Or is it going to be going up as you were suggesting over a 5-year period?
It will go up. It will go up '22/'23 , '23/'24, '24/'25 and '25/'26 March. Only in the last quarter of March 2026, it will be reduced. Otherwise, every year it goes up.
Understood. The next question that I had was more at an overall level in terms of pledging. Now that quantum was declining as the price point was moving up and that quantum has started to increase again and is now close to about 40% of your overall shareholding, I wanted to get a sense of what is driving this quantum of share pledges up. And what is the forecast -- from an investment perspective, it does become an issue that needs to be discussed at some point by the company. And that's I'm kind of seeking your opinion on this.
So honestly speaking, I mean, I am responsible for the listed balance sheet and really cannot comment on the nature of pledging but I can give you this comfort that it is not to be -- it could be some blip in the interim refinancings. The trend line will only reduce over the short and the medium term. That much of assurance I can give you. The promoters are committed in reducing the pledges and bringing them to a much more reasonable number over the next few months. So I really don't know specific reason why this blip has happened. But that much I can assure you that it is not for leveraging the equity and investing in some other businesses. It would be only limited to some of the refinancings that they may have in place.
Understood. That's comforting. And the other question that I had was that prior to the demerger, the kind of dilution that was supposed to happen on the conversion of FCCB was quite meaningful at about 20%. Could we kind of feed through that kind of meaningful dilution, again, as a scenario if in case for GMR Infra in its current form FCCBs were to be converted?
Well, the equation remains the same. There's no change in the equation. If the conversion does take place, as you know that in the 3 demerger case, it was at INR 18, right? That was the contracted value. So they're deeply into money. If they were to convert, they will have to convert on both the sides of GMR Infra and GPUIL. And effectively, they get about a 10% -- it will be a 10% dilution of the promoters in the entity.
Understood. So there will be a 10% reduction in GIL as it stands today if in case that this event were to happen, right?
Correct, correct.
The next question is from the line of Anshuman Ashit from ICICI Securities.
Congratulations on completing the demerger process. Sir, the first question is can you please give us the gross debt figure at FY -- the 9 month FY '22 end?
This is gross debt of the airport sector?
Yes. Of the demerged GIL.
If you look -- let me come in here. The gross debt for the airport -- the net debt, which I have already given the figure, was close to INR 18,000 crores. The gross debt is close to about INR 24,500 crores for all the airport that put together, for all the assets, which means that today, we have close to INR 6,300 crores of cash in all the assets put together. That's why the net debt is INR 18,000 crores.
Okay. And at the corporate level?
If you look at the corporate, corporate is about -- if you look at the total net debt and the gross debt, there is no much difference. So it is about INR 1,900 crores because gross and net the same. Hardly small, about 100 -- less than INR 100 crores -- sorry, less than about INR 7 crores that [indiscernible] there. So net debt and gross debt at the corporate level is same.
Okay. Okay. Sir, second question is a clarification. So we currently have discontinued the revenue sharing with AAI and we intend to start from FY '23 onwards. So will we have to pay in any retrospective basis also the revenue which we haven't shared for FY '21 and '22?
No, it will not be. What we explained is that if we reach recovery level of operation, the management may take a call about making the payment from next financial year. That decision has not been taken. However, as far as the 2021-'22 current year, whatever the amount which we have not paid, that will be decided by the tribunal basing on the final order only the amount wherever we are going to get the [ payment ] we are going to get, we don't know. We are not expecting that we will get -- we are -- will be required to make any payments we have.
Okay. Okay. Sir, the next question is on the Goa Airport. So we understand that the intention is to operationalize the airport by August. So is it on track? And secondly, when can we expect the tariff order to be issued related to the Goa Airport?
Goa Airport is going to start operations by other as [indiscernible] explained that we will certainly have a domestic operations from September onwards we'll pledge. As far as the tariffs are concerned. We have already filed our application with the regulator and we have discussed with them because normally regulator takes more than a year for a new greenfield airport to determine the tariff. Yes, as soon as that by the time we'll start the operations in August, they will give an ad-hoc tariff required to meet our operational and other expenses. And after commissioning of the airport within 6 months, a final tariff order will be accepted. So they will have some tariffs in the -- on the starting of the airport. And that will be -- that should take care of all of our operating and other requirements.
Okay, sir. And sir, finally, on the Kualanamu Airport, which you've recently won, so could you give us some details about the revenue sharing and the potential revenues, which we can earn from -- some details, some color on the airport, some numbers that you can share?
It is an airport, which was in operation. 2018, they were about $10 billion. The revenue -- this airport will be hosted in a separate JV co. And in that, GMR will hold 49% and AP II is the government entity, which will hold 51%. That is a structure. And the revenue share payable by this JV co to AP II I think we have already given a press statement, is about 18% revenue share payable.
Okay, sir. And so currently, the airport is operational. So can you give us the passenger figure for FY '21 if possible?
'21, I think it has been operating around 3 million because of the COVID level. FY '20 currently -- all the calendar year. Currently, it is doing better. We understand it's about 5 million, 5.5 million they're operating.
Okay. And the max the airport can handle is around 10 million currently? Without the expansion?
I think they have handled 10 million. The capacity that has been built is 12 million. So we will be -- so after we take over the airport, we will start the refurbishment of the airport. We will take the capacity to about 15 million to 16 million within the next 2 years.
Okay. Is there any related CapEx also which we are required to invest in this -- in the airport when the airport is hand over to us?
As of today, no, because once the JV company is floated where we take 49% and 51% taken by the AP II, the initial equity investment from our side will be around $13 million. After that, we don't have any financial commitment as of today.
The next question is from the line of Kelvin Heng from PineBridge.
I just wanted to check if you can maybe share some color on what is the funding plan for the remainder of this year for Delhi and Hyderabad Airport just in light of what is remaining from the existing CapEx plan? So is there a need to return to the U.S. dollar bond market later this year, at either the Delhi or Hyderabad airport level, to fund the remaining outlays?
Okay. As far as the Delhi is concerned, we have already spent about INR 50 crores to INR 100 crores. And these 2 months, so we may spend about maximum of INR 2 billion. We are still having sufficient cash, more than INR 20 billion Delhi Airport. Tapping the bond market, we'll look at it depending upon the market conditions. If there is any requirement, we'll certainly come to the market maybe [ operate ] as far as the diluted is concerned. And Hyderabad is concerned, they have already completed. Payments have been completed, more than INR 45 billion. And these 2 months they may spend about INR 1 billion, INR 1.5 billion. And this airport Hyderabad is going to complete the entire construction by December '22. So balance amount will be spent in the next financial year will be around INR 20 billion. Hyderabad Airport, as of today, doesn't require any financing because we have completely tied up the entire financing of the Hyderabad Airport. However, for any subsidiaries, if there is requirements -- if there is a big cash requirement, we will tap the market maybe in April onwards.
Okay. Understood, understood. That's very helpful. And can you just remind me when is the expected completion date for the expansion of Delhi?
That is September 2023. And you might have heard already in the newspapers, we have partially opened the arrival terminal -- new arrival terminal for the terminal 1. So we'll keep on opening up part by part. September '23 will be the full opening of the entire airport.
The next question is from the line of Aditya Mongia from Kotak Securities.
I had a few questions. So I'll go ahead. A couple of them relates to the Indonesian asset. Now the government representatives from Indonesia, the Minister over there actually has talked about fairly large numbers of investment that GMR Airport is doing in this project over time. It would be useful if you could quantify that amount to us, for us to get a better sense of how much will be the outflow over a period of time into this project.
I'm sorry, I could not understand. You are referring to Medan project?
Absolutely. In Medan project of, let's say, over a certain period of time, how much would be the investment? I understand at the start of it, it won't be there. But over a period of time, how much would the investment going into that project?
The entire life span is about 25 years. The total estimated CapEx over 25 years will be in the range of $3.2 billion to $3.5 billion.
So this is equity plus that $3.2 billion, $3.3 million.
Total CapEx, total CapEx. So we -- as far as we are concerned as per our estimate initially putting it and there was a requirement much from the promoters. It will have a sufficient cash inflow to take care of doing an expansion like Hyderabad and Delhi .
Sure. Just to clarify on this one, when you say 3.2%, 3.3%, will this be, from an equity perspective, whatever that amount is, will it be shared between the 2 entities, which are 49%-51% shareholders?
No. It is a JV company will incur. There's no shareholders. It's a JV company [indiscernible].
The related question on Indonesia. Should we be assuming that it will be throwing up cash in the initial 2 years when you are [ counting ] any CapEx and the volume levels have normalized?
Just to clarify, I think, a misunderstanding. What G.R.K. Babu is saying is the total development cost of CapEx over a 25-year period. I think your question is how much of equity investment will go into it. Correct me if I'm wrong.
It would be a good number to be having as to how much would GMR from an equity perspective be investing, let's say, over a 25-year period in this asset.
Well, 25 years is a little longer period for me to give you guidance on. But over the next 5-odd years where bulk of the development will happen, our investment will not be than USD 100 million, USD 120 million. Obviously, the JV partner will also contribute in that and the balance will be leverage that will be taken. And this is notwithstanding the internal accrual because this is an operating airport, right? So the internal accruals will further supplement any requirement on the development side. So it's absolutely limited equity investment in that airport.
Sure. And this question that I was asking was, should we be assuming that there would be internal accruals in this project at, let's say, once it becomes -- comes back to pre-COVID levels even after the revenue share that you have promised?
Yes. It has sufficient -- because the revenue share payable is only 18% and it has got good revenue. And we are going to -- our expertise is going to be used for development of a lot of [indiscernible]. The project itself will throw a good amount of cash that could be plowed back for an expansion [indiscernible] instead of reporting to the shareholder budget.
Sure. A subjective question from my side. I mean it seems that Goa and Indonesia both appear to be good investment prospects for you. Would I be wrong in saying that Indonesia can be even better than Goa from the perspective of the value generation that happens over time given the terms because obviously Goa is a higher revenue share also.
And that is the obvious answer.
Potentially, I would say, yes, potentially. And I would attribute it to certain geographical attributes that Medan brings to the table. So if you look at the location of Medan, it is actually in direct competition with Changi and Kuala Lumpur. And if you look at the traffic flow from Europe into that part of the world, it will be an alternate hub to these 2 destinations, and hence, can be a very meaningful play going forward. But that's the thought process in which we also identified this as a destination. And that's how we have invested there. Now that is as far as geographic locations and traffic. But you should also look at Goa from the real estate side of it. So I mean, as you are aware that airport is not merely earning tariff-regulated earnings, but also the non-tariff-related which could be a non-aero and also the real estate side of it. Goa offers a very compelling real estate side of it. It is a fully environmentally approved land parcel around that for hospitality development, which, as you may be aware, Goa struggles to find hospitality rooms given the nature of environmentalists in that part of the world. So you don't have hotel rooms coming up, but you have villas coming up and those villas are extremely expensive. So you have to view it more holistically. But yes, Medan, of course, offers a very compelling proposition to airlines as an alternate destination into the gateway of Southeast Asia.
Understood. Now the other question that I had was about I would assume from what I know that there will be more prospects beyond Medan for you and other operators to be bidding for in Asia, given the drive towards privatization that is happening over there also and the business model is uncertain, completely agree, but there'll also be opportunities. From a funding perspective, I also see that -- from a GMR Airports perspective, that is still a standalone debt that is there. And I'm trying to kind of grapple as to whether there is enough support that you would be having given the opportunities that may be coming up in India and Indonesia. So if you could give us some sense of how you are thinking through from an opportunities perspective and from the perspective of you actually bidding for them.
Well, that's a very fair question to ask and the response is multifold. Number one, I think we had alluded to earlier in our presentation that many of the adjacent businesses are now being brought out of the concession entities into the main entity, which is GMR Airports, right? So that entity will no longer be just a mere holding company. It will be an operating company with many SBUs and these are very fast-growing businesses, which will be there. So it will throw up cash. It will also have financing capacities available in GMR Airports going forward. That's number one. Number 2 is let's look at various opportunities that are coming in India and in Southeast Asia. Most of them are brownfield airports do not require too much of equity outlay, requires lot efficiency and has the ability to build out recourse debt for the development of those concessions. We intend to play that strategy out going forward. Third is, as you are aware, there are many assets are now booked now, which are not maturing. So we have the option, and I don't want to be pinned down on that, but we have the option to monetize some part of a mature -- some part of mature asset and take that money and put in development asset. So from an arbitrage perspective, earn much higher returns on the same capital as I look at opportunities coming both in India and abroad. Last but not the least is you have to look at also that GMR Airports is a joint venture, so it has GIL, which will contribute some equity and ADP will contribute some equity. Within our scheme of things like we did in the case of Delhi and Hyderabad in early days, there is a lot of tailwind by many of the sovereign and pension funds who want to actually participate to -- on the equity side of it at the asset level itself. So a combination of many of these things will play out, which ensures that the current perceived lack of capacity of GMR Airports because of the debt of INR 3,000 crores on the GMR asset book does not become constrained and we do not lose out on the growth opportunity going forward. So it will be a combination of these things that will be playing out. I cannot give you a very specific answer because that will be a little market sensitive from my perspective.
And lastly, on that corporate debt that is sitting at this point of time. Obviously, there is no way of servicing it given the state of affairs at the Airports from a CapEx perspective. Is there an endgame over there that you would want to kind of elaborate on to take that kind of stress out.
So we will be refinancing that debt. That is a process, which is already underway, that will be refinanced. Like I told you earlier, the stress comes because if it is not an operating entity. In 3 years' time, GAL will be a very vibrant operating entity, which has significant businesses in duty fee, in F&B, in cargo across India and across Asia. So we need to keep that into mind. It will be very easily available to manage that debt. You also must take into cognizance that GAL also gets a certain operating fee and management fee from the assets that it manages. Going forward, that will continue to play out. So there will be significant amount of predictable, assured management fees coming from the airport assets to GAL for it to manage its own balance sheet. So again, multiple streams of income, cash income and also a recycle of capital and partnership will play out as GAL looks for further growth opportunities in India and Southeast Asia.
It was very clear, and all the very best. Three years from now, I hope that once things become a lot better and the reverse merger happens, it will be a fantastic entity to see in terms of cash flows.
Absolutely, absolutely. And that is the journey, Apoorva (sic) [ Aditya ], that we are looking at. It's just a bridge to substantial value creation in fiscal year '24, '25 when all contracts get settled.
The next question is from the line of Apoorva Bahadur from Investec.
Sir, quickly, I think you highlighted that this conversion ratio for FCCB will be around 10%. I mean the dilution at GMR Infra level. Can you explain the maths over here? How does it change from 20% to 10%?
Can you just have this question taken off-line and I would rather discuss it. As this is a math, maybe Amit can send you the maths on this. So there are different price points for the airport and different price points for GP wise. So we will send you the math as to why the promoter dilution is around 10-odd percent.
As there are no further questions from the participants, I would now like to hand the conference over to Mr. Saurabh Chawla for closing comments.
Yes. Thank you. Thank you, everybody, for participating in our Q3 call. Really appreciate your time. The IR team is available off-line to answer your specific questions, especially those which we said that we will give you the further details. So please reach out to both Amit and [ Vishnu ] and they will answer all questions. And look forward to your inputs going forward. We are sensitive to the inputs by the capital market players. And I can assure you that our strategy will get tweaked because we are -- we believe in value creation. And as on date, any value created, 63% do go to the promoters. So we are working towards that. We are working towards asset-light, capital-light business model. The big CapExes are getting over. New opportunities will come, but those will be mostly in partnerships so they should start yielding good equity value for the shareholders. Last but not the least, the cherry on the pudding is the adjacent businesses that I've talked about. Look at it seriously, look at to what the duty-free [ pulls ] at Delhi Airport and Hyderabad Airport and then you start to extrapolate that into an independent business unit at GAL with the world as a platform, you will get a very different outlook. So look forward to interacting with you off-line, and take care and be safe. Thank you so much.
Thank you. Ladies and gentlemen, on behalf of GMR Infrastructure Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.