Shares of GMR Airports Infrastructure fell over 1% in early trade on Monday after the company announced the merger of its joint venture (JV) company into GMR. The merger will strengthen the balance sheet to capitalise on upcoming growth opportunities, GMR Airports Infrastructure said in an exchange filing. The merger is expected to complete in the first half of 2024.

As part of the deal, the French airport operator Aéroports de Paris (ADP) and GMR Airports Infrastructure (GIL) will merge their JV company, GMR Airports Limited (GAL), into GMR. GAL is the existing airport platform unlisted entity. ADP and GMR Airports Infrastructure own 49% and 51%, respectively, shareholding in GAL.

“GIL and Groupe ADP will settle the cash earnouts to GIL at ₹550 crore and the equity earnouts whereby GIL’s stake in GAL increases to 55% (pre-merger) from 51%,” GIL said in a release on March 19.

Following the completion of the merger, GMR group will remain as the single largest shareholder of GIL, with GMR Group owning 33.7%, Groupe ADP holding 32.3%, and public holding 34%, respectively, of the paid up equity share capital. Post completion of merger, GMR group would continue to have management control over merged GIL while Groupe ADP will be categorised as “co-promoters of GIL and have commensurate board representation”.

“The merger would result in taking the GMR’s partnership with Groupe ADP to the next level. In addition, it will enable an earlier and full settlement of the earnouts, which for a period of 2 years were adversely impacted due to Covid conditions,” it said.

“With the subscription of FCCB’s by Groupe ADP, GIL will be further deleveraged by repaying corporate debt and also settling most of the contingent liabilities related to GPUIL,” it added.

The merger scheme is subject to the receipt of requisite approvals from the Stock Exchanges, Securities and Exchange Board of India (SEBI), the National Company Law Tribunal (NCLT), other statutory and regulatory authorities.

In early 2020, Groupe ADP entered into a strategic partnership with GMR Airports Infrastructure (Formerly GMR Infrastructure) to create a world class airport platform whereby the French major agreed to buy 49% stake in GAL. At the time of the transaction, Groupe ADP had pegged equity earnouts of around 8% of GAL and cash earnouts of ₹1,060 crore to GIL.

Besides, the board of GIL also approved raising around EUR 331 million (₹2,900 crore) from Groupe ADP through 10-year foreign currency convertible bonds (FCCBs). The FCCBs carry a coupon of 6.76% per annum, which will be accrued till the end of the tenure. The conversion price is ₹43.67, which is 10% premium to the FCCB regulatory floor price under the FCCB Scheme.

Reacting to the news, GMR Airports Infrastructure shares opened higher at ₹42.87 against the previous closing price of ₹42.68 on the BSE. In the first hour of trade so far, the stock declined more than 1% to hit a low of ₹42.17, while the market capitalisation slipped to ₹25,496 crore. In comparison, the BSE Sensex was trading 677 points lower at 57,313 levels. 

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