Ladies and gentlemen, good day, and welcome to Q4 and FY22 earnings conference call of GMR Infrastructure Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. We have with us today Mr. Saurabh Chawla, Executive Director of Finance and Strategy, and other senior management from the business.
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 his opening remarks. Thank you, and over to you, sir.
Thank you. Good afternoon, ladies and gentlemen. Thank you all for joining our fourth quarter fiscal year 2022 earnings call of GMR Infrastructure. Hope all of you are doing safe and are keeping well. To begin with, I would like to just make a short comment on our economy. It's been recovering quite smartly, especially after the post third COVID wave. During Q4 FY22, the economy displayed stability despite global headwinds arising from geopolitical tensions and interest rate hikes in the U.S. India's GDP growth rate for fiscal year 2022 is expected at 8.6% compared to a contraction of 7.3% in fiscal year 2021. Going forward, according to IMF's estimates, India's nominal GDP is expected to cross $5 trillion by fiscal year 2029.
As you are fully aware, growth in GDP implies a multiplier effect on the aviation industry like ours. Coming to our performance for fiscal year 2022, GMR Infra's net revenue increased by 37% year-on-year to INR 4,377 crores, while EBITDA increased by 167% year-on-year to INR 2,103 crores in fiscal year 2022, mainly driven by traffic improvements in our Indian operational airports. Net loss after tax has also reduced from INR 1,243 crores in fiscal year 2021 to INR 752 crores in fiscal year 2022. I would like to highlight the following key points with respect to our airport business.
Firstly, on the Nagpur Airport, the Supreme Court of India has upheld the judgment of the Nagpur bench of the Bombay High Court, which had previously quashed and set aside the letter issued by MIHAN annulling the bidding process for the Nagpur Airport. Accordingly, the authorities are expected to execute the concession agreement at the earliest for Nagpur Airport with GMR. Secondly, as culmination of a process, Hyderabad Airport has received a letter of confirmation from Ministry of Civil Aviation extending the term of the concession agreement for a further period of 30 years. That is from March 23, 2038 to March 22, 2068. Thirdly, we have made significant progress on our CapEx programs related to expansion. Delhi, Hyderabad and Goa airports have achieved 61%, 73% and 72% completion as on March 31, 2022.
As you know, Goa Airport is expected to be inaugurated during August 2022, while Delhi and Hyderabad is targeted for completion in September 2023 and December 2022. In Crete Airport, approximately 11% financial progress has been achieved with the completion of 76% of earthworks in the airport area and 30% earthworks in the access roads as of March 31. We are on track to achieve the completion target at our airports. Fourthly, the traffic has recovered rapidly, especially the domestic traffic post third COVID wave, which hit India in December of 2021. Domestic traffic at our Indian airports has already reached near to full recovery, while international traffic is fast catching up as only on March 7, 2022. In fact, the daily average passengers in the Delhi Airport, Hyderabad Airport have reached 65% and 74% during the week ended May 8, 2022 respectively.
Cargo traffic remained resilient and is unfazed by the multiple COVID waves. In our international airport business, Cebu Airport is in a recovery phase. Its domestic daily pax is now almost 50% of pre-COVID level, while international is at a nascent 7% as of April 2022. Overall connectivity in our Indian airports have also increased. In Delhi Airport, 77 domestic destinations are now connected as against a pre-COVID level of 72 domestic destinations. On the international front, 49 destinations are connected as against pre-COVID level of 78 domestic destinations, which will significantly increase, as already indicated, that the scheduled international operations have just begun from May 27.
In Hyderabad, 70 domestic destinations are now connected as against a pre-COVID level of 55, and on the international side, 16 destinations now connected, which is equivalent to the pre-COVID time. At our Delhi Airport as an interim arrangement, we and the Airports Authority of India have entered into a settlement agreement for the payment of the monthly annual fee with effect from April 2022 prospectively.
On our new airport wins, Medan Airport, that is Medan Airport in Indonesia, the team mobilization and preparations have begun to ensure that the SPV starts operating the airport by beginning of Q2 of fiscal year 2023. Going forward, traffic recovery, we expect that the traffic recovery will gain further momentum, mainly driven by the start of the scheduled international operations. Significant population in various countries are fully vaccinated. For example, India is 64%, U.S. about 66%, U.K. 74%, Canada 83%, and globally, if we look at it's about 61%. Countries have also started administering booster doses, which will further boost passenger confidence to travel.
Fleet addition by major Indian airlines and the takeover of Air India by the Tatas, entry of new airlines such as Akasa, including restart of Jet Airways, is further likely to boost traffic. In our view, possibly the fourth wave impact may be limited as economic and air traffic recovery post second and third waves have been quite rapid. On the ESG front, sustainability has always been an integral part of GMR's corporate ethos and the business strategy. It is our strong belief that economic growth and resource conservation are complementary goals to support sustainable development.
We at GMR have adopted strategies and methods to reduce adverse impacts on environment from our operations. Some of our operations are carbon neutral, and we monitor our activities carefully to analyze and further reduce the emissions. The presentation with all financial numbers are already available with you. If not, you can download them from our IR section of 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 side and the businesses can answer your queries. Thank you so much.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Anyone who would like to ask a question, please press star and one at this time. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Mohit Kumar from DAM Capital Advisors. Please go ahead.
Yeah. Good evening, sir, and congratulations on getting the concession from Nagpur Airport back. My first question is, given that the world is getting normal and how do you see the pace of monetization of the balance of land, especially in Delhi and Hyderabad?
Honestly speaking, which we have highlighted in many of our previous calls also, at this stage, we are not looking at further monetization of land. There was an option that had happened in which Bharti had won for a potential development of 10 million sq ft in two parts, 5 million sq ft first and the second 5 million sq ft . We will wait for that development to take off before looking at any further monetization. As a strategy going forward, honestly, our focus is now going to shift from monetization of land to self-development, build offices and commercial properties for build-to-suit customers. That would be our focus going forward.
There could be some intermittent, you know, land parcels to be monetized, but that is not an ongoing long-term strategy as far as Delhi Airport is concerned. It's pretty much similar in Hyderabad. Although in Hyderabad we have few land parcels that have been now contracted to be delivered to third parties. These are in the area of education. They are also in residential, basically the cohabitation functions which are there in Hyderabad. Also, long-term leasing of our SEZ lands for industrial development.
Hyderabad of course will follow a mixed use, but again. The broader strategy also would be still, you know, as we go forward, enter into the arena of self-development which after development we can monetize those assets and then get the requisite margins on those developments which to date we are missing in our business.
Understood, sir. Secondly, sir, on the revenue share, if I am correct, I believe that you'll start sharing the revenue from April 1, 2022. Is my understanding correct?
That's correct. Correct.
Lastly on this, have you filed a petition for Goa and when do you expect clarity on the tariff order? How and how will you charge in the interim once the operation starts?
Yeah. Goa we have discussed with the regulator. We have already filed an application for the total tariff and also for the interim tariff. Since for the total tariff the regulator says that he will take more time, about 9-10 months, he has advised us to file for interim tariff valid from the date of commissioning of the airport till March 2023. That has also been filed with them. We are expecting that the tariff will be in place by the time we start the operations in September.
Understood, sir. Thank you and all the best, sir. Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Subhadip Mitra from JM Financial. Please go ahead.
Good afternoon, and thank you for the opportunity. Two questions from my side. To begin with, I think, the auditor's report talks about some qualifications, if you can, you know, help us with some color on the same?
Secondly, on the EBITDA for fourth quarter, you know, whether for some consolidated or whether for Delhi, Hyderabad individually, we've seen a decline YOY and QOQ. Any particular reason for that?
Yeah. The auditor qualification is mainly related to the comparative periods, because in comparative period you must seen that, the discontinued operations are coming for the non-airport business. The auditor qualification is related to the comparative period were not restated for the qualifications. Overall basis on financial basis there's no impact in the current period.
Understood. These are largely for the discontinued operations and that too for the previous year. Am I right?
These are largely for the discontinued operations. Except one which is for the VDF, there is no financial impact for the same, because that qualification was corrected in the March 2021 explanation.
Understood. Okay. On the second question on the EBITDA, if you could please answer.
As far as the DIAL EBITDA is concerned, where it has come down on year-on-year comparison, in FY 2021 last quarter we have accounted the Bharti income on straight-lining basis. Subsequently, since, as per the agreement, revised agreement Bharti, they have taken over 2.72 million sq ft and the balance 2.16 million sq ft they will be taking over only in April 2023. It has been reversed. That is the impact. The amount accounted for in FY 2021 last quarter is very high amount on entire 4.9 million sq ft, whereas now it is accounted for 2.78 million sq ft.
Sir, what is the quantum that has got reversed?
The total reversal as far as the Bharti is concerned, as an exceptional item is about INR 325 crores has been reversed.
Okay. Anything on Hyderabad specifically?
There's not much difference in Hyderabad. Hyderabad year-on-year comparison. One minute. The EBITDA has moved INR 104 crore to INR 87 crore.
Right.
It is basically some operational expenditure has been accounted for in the last quarter.
Okay. There are no one-offs over there?
Nothing. Nothing.
Okay, understood. That's it from my side. Thank you.
Just to add on this, you know, as the airports come back to normalcy and they start looking at actually now growth from where, you know, when COVID hit, there will be some, you know, mobilization of people which will start getting accounted for. That is where a little bit of additional expense that has happened. Nothing more than that.
Got it. Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Apoorva Bahadur from Investec. Please go ahead.
Hey. Hi, sir. Thank you so much for the opportunity. Sir, wanted to know, I think in the last quarter you went right basically on debt refinancing for the contingent liabilities.
Sorry to interrupt you, Mr. Bahadur. May I request you to come closer to the phone? Your audio is quite low.
I hope it's better now.
Yes. Thank you.
Yeah. Sir, wanted to know on the debt refinancing for contingent liabilities. I think we were looking to refinance part of the non-power or non-airport business debt so that the contingent liabilities which have been moved to the airport business are negated. Any update on that, sir?
Yes. There are three main contingent liabilities which are continuing on the books of GIL versus what they have given to GPUIL . The first one is related to the acquisition financing that was done many years back for acquiring the 30% stake in PT GEMS . That acquisition financing was to the tune of almost $500 million. Today, the outstanding is about $165 million. As you may be aware, you know, coal prices have shot up over the last almost 9-12 months. Recently, of course, they've been hovering around $100 a ton.
With an expanded capacity of almost, you know, 35 million tons-36 million tons on an annual basis and a coal price of almost $100 a ton, this business is throwing exceptional amounts of cash for the shareholders. As we speak right now, theoretically, this $165 million of outstanding will come down to zero in a very short period of time within this fiscal year. Having said that, you know, GPUIL is currently in the process of refinancing this $165 million. The term sheet that GPUIL has signed with respect to that refinancing envisages no corporate guarantee from GIL. I've given you two indications.
One, the cash flow itself is very robust to bring it down to zero within the current fiscal year. The second one is that it is in the process of refinancing. The second asset under which there was a guarantee that was with respect to Bajoli Holi. The Bajoli has now achieved completion as of end of March of 2022. The guarantee that was given, that falls off, and what will be continuing over there is just a comfort letter as a sponsor.
As we go forward, as the asset becomes stable, because you know, there's a phase wise in which these run-off river projects are energized, we will be refinancing the debt at Bajoli, and that should also within this by end of this fiscal year, that guarantee also should get removed from or comfort letter actually should get removed. It's not even guarantee, it's a comfort letter which should get removed from the books of GIL. The third one is related to the restructuring that was done at Rajahmundry, which is the gas plant, and for that restructuring, GIL had given a guarantee.
As we speak right now, gas is still not available, but there is a stay, which is there in place, in the courts against banks to take any action on this because it was the responsibility of the state to provide the gas, which they have not been able to provide. Having said that, we are again in the process of disposing of that asset. We should be working towards selling that asset over the next few quarters. We are getting good inquiries, especially from buyers out of Africa. We may sell that asset by end of this fiscal year or early next fiscal year and remove that guarantee also.
The general guidance to you is that at least two out of the three guarantees will automatically get removed upon the consummation of their transactions. The third, which is the Rajahmundry one, we do expect it to get completed, but it may flow into the next fiscal year. That's the broad guidance to you.
Okay. Very useful, sir. Thanks a lot. Sir, on this Rajahmundry, the inquiries that you're getting, is the consideration adequate to pay off the entire debt, or will we have to take some haircut over there?
Well, I would be able to guide you better once we have something firm on the table. So far, it is a combination of equipment sale and land monetization. The land over there has now become more of an urban land, and hence, there is a much better value associated on that. It is a combination of equipment, which is, as you may be aware, it's a plant which is mothballed, and it's a very, it's a GE plant, which is, which has not been operated and hence, almost as good as new. That is something, it'll be a combination of both. We believe that we should be able to get the full value of the, of, to satisfy the lenders over there.
Okay. Sir, you also highlighted that on land development side, we will be entering into focusing more on self-development. Have you earmarked any CapEx for this? Any specific amount, how much will we be spending and over what time frame?
We are proposing over a period of next 3-4 years will be around INR 400 crore-INR 500 crore. As of today, we are just concentrating on completing the expansion. It'll be a small amount of maybe INR 50 crore-INR 100 crore only we'll spend in the next 1-2 years.
For self-development, honestly, you really require actually construction finance. You're not putting much of your equity, cash equity into it. Not much will be allocated on these self-developments, and it's just a beginning of a particular process as we speak.
Okay. Got it. Also any update from KIA on the FCCB conversion for the airport business, basically, any strike price that has been determined yet? We are in conversation with KIA.
As you are aware, they have been very supportive of our efforts to create a pure airport platform and also spin out the non-airport businesses. They have, honestly speaking, benefited in value creation because prior to the demerger last year, similar time, the stock price was about INR 22-INR 23 . Today, it's at about INR 35-INR 36 . Has seen a high of more than INR 40 . They have benefited in that where they have facilitated this value creation. As and when we culminate our conversation, obviously we will inform the markets as to where they go. Between GIL and GPUIL , the allocation for GIL is about $25 million. And for GPUIL , it is about $275 million.
Right, sir. Sir, last question from my side, and that is, I believe we were due to receive some EBITDA base payout from ADP this year, based on the performance of the airport business. We wanted to know if we have received any amount and what quantum?
We have not yet. As the process is a little different. It doesn't happen instantly, as soon as the fiscal year ends. We'll have to wait till this audited numbers go out, and then the process of validation and verification and the understanding as per the shareholder agreement will be entered into. It's not like an instant, you know, take or pay kind of a transaction. It'll happen within the first 6 months.
Also, just to highlight that, you know, last year, we had the issue of the minimum payment to Airports Authority, so that is still pending. As and when that gets also addressed, then we will take it forward because the quantum gets determined based on all matters being settled.
Yeah. Okay. Unless that AAI dues issue is settled, which is in court, we will not receive the EBITDA-based payout. And sir, if the issue is settled in our favor, hopefully, what would be the quantum which we will receive this year, sir, for the EBITDA-based payout?
We have almost achieved EBITDA, which is the requirement is about INR 2,250 crores. We have almost touched around INR 2,200, so we should able to get more than INR 300 crore.
Oh, okay. Fair enough, sir. Thank you so much, and all the very best.
Thank you. The next question is from the line of Aditya Mongia from Kotak Securities. Please go ahead.
Thank you everyone for the opportunity. The first question that I had was related to the trends in non-aero revenues per pax that you highlighted in your presentation, which suggests a meaningful improvement versus pre-COVID times for both the airports. Could you give us some sense as reasons why this improvement is happening and whether this is sticky or transient?
Basically the spend per pax has substantially gone up in case of the duty-free, where there is a huge sales are taking place, and also the advertisement has come back up in very good numbers, and cargo has shown very good results. These have actually enhanced our non-aero revenues. Again, as G.R.K. Babu has highlighted, I would just like to articulate our strategy. Our focus on the non-aero is very sharp. While as macros improve, the number of travelers will improve as disposable incomes go up. People will move away from railways and start to travel. It's everybody has seen what has happened once the per capita income goes above $2,500. All that will happen.
From our side, our key focus would be as management over here, what all can I do to offer our customers more brands so that they can shop in our airports rather than get cannibalized by airports, especially the hubs of the Middle East or Far East. That is our focus, and it's good to see that as we increase the brands, as we increase the visibility of these brands at our airport, the spends have started to go up. Just to anecdotally tell you that there was a time when we used to only offer Red Label and Black Label whiskeys, but now the whole fare is there and everybody wants to buy.
On a price, on a product price basis, actually we are more competitive than even Dubai. It's a notion in people's mind that Dubai would be cheaper. Actually we are cheaper than Dubai in many products. That would be the focus. Second is also how the traffic is moving. Previously there were lot of focus of the policymakers was to which encouraged actually hub travel. A lot of the demand got cannibalized by Middle East specially. Now, with the direct flights going into North America and obviously Europe, we have direct flights. Also now direct flights into Australia. We see a lot of shopping happening over here rather than getting people waiting at Dubai or Doha to shop.
That is further adding incremental demand at our airport. A lot of work we are doing, as you are aware, we have an industrial partnership with Groupe ADP. We are working very closely with them as to what all we can offer at our airports, how we bring more brands into our airports and continuously increase the spend per passenger. The way I would like you to look at an airport is actually it is a shopping area. You know? I would like people to shop more and more at the airport, and we provide services to facilitate that shopping, shipping, whatever is necessary. It's a large retail mall, which is where the base cost is being serviced by the aeros and the cream comes from the non-aero. That's the way we are focusing on our business.
Thanks for the response. The second question that I had was more to do with the interest rates that on a blended basis that Delhi and Hyderabad would start paying and the time period post which, let's say, a meaningful refinancing can happen on those rates?
No, Hyderabad, if you look at it, their rate of interest, blended rate is, which are fully hedged. They have got three bonds. One is INR 350 million, INR 300 million, INR 300 million. Total INR 950 million bond. The average rate of interest is less than 9%, 10% altogether. The repayment which are coming up is only in 2024 and 2027 and 2029. At appropriate time we get them either refinanced depending upon the cash flows, we fully repay them. That is as Hyderabad is concerned. The DIAL, the average rate of interest, of the existing bonds, the three bonds, about INR 522 million bond is there. Then we have INR 450 million bond, another INR 500 million bond, then INR 450 million.
Altogether about INR 1.45 billion. The average rate of interest will be around, including the hedging, is about 10.4%-10.5%.
Sure. Got that. The third question that I had was, there was a hint given that obviously, Indonesia would start contributing, in the next year. I wanted to get a sense of, what kind of, EBITDA run rate post-revenue share should, we analysts be budgeting in for the full year?
You're talking Medan. Medan Airport will be taking over only in July. As of today, I mean, the revenue share payable in case of Medan is about 19%. We have already filed an increase in the tariff, that is already under consideration of the government. This will start throwing the cash first two years. After that it will get into an expansion. There should not be any, I mean. In fact it will be positive first two years. After that it will get into the full expansion.
Medan is a 10 million passenger airport. As of today, it's a 10 million passenger. Our strategy of course there is to leverage its own balance sheet for funding going forward. You wanna add something?
We have already infused the equity in case of the Medan Airport. Total equity is about INR 25 million, both shareholders together, in the JV company. Initially, we will be doing an expansion from INR 10 million to INR 15 million. That's called immediate capacity augmentation. Once that is achieved, beyond that, we'll go for full expansion. As Saurabh explained that, it is a balance sheet, it's a strong balance sheet, and, beyond the equity what we have infused, there is no, further requirement from the shareholders, number one. Number two, Medan will be accounted on equity method because, we are holding only 49% stake, whereas AP2 is holding 51% stake.
Got that. Last question from my side before I get inside the queue. At an overall level, the share from profits from associates appears to be a healthy INR 40 crore number for the quarter. On a run rate basis, probably ahead of where we were in a pre-COVID basis. Is it more to do with the retail spends in Delhi and that figuring in over here? Or is there also a component of certain loss-making Hyderabad joint ventures becoming profitable and the sustainability of the same? Thank you.
When it comes to the JVs profitability, it is basically in case of the Delhi duty-free has thrown us a good amount of profits. You are correct, in the last year to date, FY21, we have incurred INR 117 crore loss. Whereas the current year we have incurred INR 71 crore profit. Basically, Delhi duty-free has given a good amount and Celebi has given a good amount of the profits.
Got that. Thank you for this. I'll get back into it.
Thank you. The next question is from the line of Apoorva Bahadur from Investec. Please go ahead.
Thank you for the opportunity again. Just wanted to check. Delhi government has come out with a new liquor policy. Apparently we are reading media articles that the outlets are vending liquor at 30%-40% below the MRP. Right. Do you see any sustainable impact of this on our duty-free business going ahead?
No, that will not have any impact as such. Actually, Delhi government has already put the restrictions on the sales, any discounting. Cannot give any more discounts. As far as our duty-free sales are concerned, which are basically the, I mean, the quality wise, which is entirely different from the quality of the product which is available in the market.
Maybe just to add to that, price arbitrage between duty-free pricing and the high street. Arbitrage may have gone away to some extent. We don't see any significant impact on the duty-free sales. One, because of the price itself, and secondly, I think there is the quality of product. People have more you know confidence in that in the duty-free.
As a matter of fact, honestly speaking, even our duty paid business is doing quite well. The real aim is how does duty paid versus at the high street that you get in the city. No impact, honestly speaking, on our business.
Okay. Very reassuring to know that. Thank you so much. All the best.
Thank you. The next question is a follow-up from the line of Aditya Mongia from Kotak Securities. Please go ahead.
Thanks for the opportunity again. I just wanted to kind of clarify regarding the operating expenses booked in the quarter. What is the element of one-off? On a QoQ basis there's, I think, INR 100 crore kind of increase that has happened. Is it all related to one-off? We just want to get a sense.
Which one? Which company you are referring to?
Sorry. I'll clarify. At an overall level, the other expenses of the company have increased on a QoQ basis, even though top line has declined. The question, I think there was an explanation given of provision against certain past revenues specific to realty. I just want to kind of confirm the numbers for the one-off for the quarter.
There is a one-off item, which we have made a provision is the revenue share payable to Airports Authority on SEIS scrips, which we were contesting with AAI.
This is pertaining to the 2018, 2019, 2020. Finally, we have agreed to pay the amount. That's why we have made a provision for INR 43 crore in the DIAL. That is one of the major expenditure which has been hit. In case of the DIAL there are about INR 15 crore-INR 20 crore additional expenditure, as Saurabh explained. In the last quarter, we have to make various expenditure and provision which has been accounted for.
Understood. Could you share on the PAT number for Delhi duty-free for the year and/or for the quarter?
Delhi Duty-Free, their total PAT is about INR 180 crore for the year.
For the fourth quarter, if you have the number handy, it'd be very useful because the full year is not an adequate representation of next year given COVID.
Aditya, this nitty-gritty numbers detailing can be provided to you or offline.
Got that. Those were the questions from my side. Thank you.
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Saurabh Chawla for closing comments.
Thank you. Thank you, ladies and gentlemen, for this call. We are available offline for any minute details that you may require, whether from the JV entities or subsidiary entities, or any clarification on the balance sheet. Please reach out to Amit and Vishnu, and we will endeavor to answer your questions as quickly as possible. Thank you so much, and have a wonderful day. Thank you.
Thank you.
Thank you. On behalf of GMR Infrastructure Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.