GMR infra to divest stake in Mactan Cebu International airport for Rs 1330 cr; stock gains in weak market—Check short term target price

Shares of GMR infrastructure jumped early three and half per cent in a week market after GMR Airports, a stepdown subsidiary of GMR Infrastructure Limited (and direct subsidiary of GAL) entered into definitive agreements with Aboitiz InfraCapital Inc (AIC) for divestment of its stake in Mactan Cebu Internatonal airport.  

Shares of GMR infra rose around 3.5% to trade at Rs 39.75 per share in BSE intraday trade on Friday.  

Speaking on the chart of GMR infra, Gaurav Ratnaparkhi, Head of Technical Research at Sharekhan by BNP Paribas, said the stock has broken out from a large base triangle pattern, which is spanning over last 3-4 months.  

So, it has turned positive not only for the short term but also for the medium term, he said. The price breakout is supported by momentum indicators as well, said the expert. Going ahead, 38.50-39 will be the initial hurdle zone beyond which the stock can target the level of 45, he added.  

"GMR Airports International BV (GAIBV), a stepdown subsidiary of GMR Infrastructure Limited (and direct subsidiary of GAL) has entered into definitive agreements with Aboitiz InfraCapital Inc (AIC), for AIC to acquire shares in GMR-Megawide Cebu Airport Corporation (GMCAC)," said in a statement on Friday.  

The objective is to focus on significant deleveraging of GMR Airports Limited (GAL) and rebalancing of airport portfolio to focus on high growth opportunities. 

GMCAC, a joint venture between GAIBV and Megawide Construction Corporation (MCC), is the developer and operator of Mactan Cebu International Airport (MCIA). 

“We are happy to welcome and partner with Aboitiz InfraCapital (AIC) at Mactan-Cebu International Airport. In the last 8 years, we have completed the expansion plan and have been one of fastest growing airports in the region which led to steady returns. With AIC’s deep expertise in the region, we are confident that Cebu Airport will reach new heights," said Srinivas Bommidala, Business Chairman – International Airports, GMR Group said.  

What does this agreement entail?  

1. The agreement involves GMCAC’s issuance of primary shares and the transfer of secondary shares from Megawide and GAIBV to AIC amounting to PhP 9.5 bn, which will result in the latter owning 33 and 1/3% minus 1 share stake in GMCAC. Simultaneously with the above, the transaction likewise involves the issuance by Megawide and GAIBV of Exchangeable Notes for PhP 7.75 bn each aggregating to amount of PhP 15.5 bn (Notes). The Notes will mature on 30th October, 2024 and will be exchanged by AIC for the remaining 66 and 2/3% plus 1 share of GMCAC’s outstanding capital stock. 

2. The transaction will be undertaken at an enterprise value of PhP 49.7 bn (INR 70.5 bn) and GAIBV will receive an upfront amount of PhP 9.4 bn (INR 13.3 bn) in lieu of the shares being transferred, and Notes being issued. We would continue to operate as the Technical Services Provider to GMCAC until December 2026, would also be entitled to additional deferred consideration based on the subsequent performance of GMCAC for the same period. 

3. A portion of the primary investment into GMCAC shall be used for acquisition by it of identified entities providing services at Cebu Airport. 

AIC is the infrastructure arm of the Aboitiz Group. The company develops and operates economic estates, water facilities, digital infrastructure, and transport & mobility projects that enable businesses and uplift communities. The transaction is subject to customary regulatory approvals in Philippines. 

GMR Group is a leading global infrastructure conglomerate with expertise in designing, building and operating Airports. It also has a significant presence in areas of Energy, Transportation, and Urban Infrastructure.