gmr airports infrastructure ltd share price Management discussions
Forward-looking Statements
This document contains certain forward-looking statements based on the currently held beliefs and assumptions of the management of GMR Airports Infrastructure Limited (formerly known as GMR Infrastructure Limited) ("GIL"), which are expressed in good faith, and in its opinion and judgment, are fairly reasonable. For this purpose, forward- looking statements mean statements, remarks or forecasts that address activities, events, conditions or developments that the Company expects or anticipates could occur in the future. Because of the inherent risks and uncertainties in the social and economic scenarios, the actual events, results or performance can differ materially and substantially from those indicated by these statements. GIL disclaims any obligation to update these forward-looking statements to reflect future events or developments.
Introduction
The FY 2022-23 was an important year in the journey of GIL. While grappling with a number of headwinds, the overall direction of the Indian economy and the renewed growth prospects of the Indian aviation sector have helped strongly re-establish the opportunity available for GIL to emerge as a leading airport platform.
Early during the year, vaccination drives around the globe resulted in pandemic waves becoming shorter and less impactful. Further, World Health Organization (WHO) re-classified covid as endemic from pandemic, thus indicating that, while covid may never go away completely, the intensity of the virus is expected to weaken. While on one hand, the receding pandemic fears resulted in a strong post-COVID recovery, on the other hand, the geo-political scenario turned negative. The continuing Russian invasion of Ukraine coupled with weakened supply chains triggered high inflation globally. This resulted in Central banks across the world acting in unison to tighten liquidity mainly through increasing interest rates in order to rein in inflation. However, this sudden change in monetary policy stance from accommodative to tightening caught many off-guard. While it did lead to difficulties for many countries and corporates, it also triggered the collapse of a few regional banks in United States and a major bank in Europe.
China continued with its drastic "Zero Covid" policy long after other economies had opened up and only towards December 2022 did it start relaxing this policy. As a consequence, Chinas manufacturing sector continued to be disrupted with some companies closing down their China operations, which in turn resulted in a slowdown of Chinas economy and disruption of global supply chains.
Global economic scenario
While post-pandemic recovery in CY2021 witnessed a GDP growth of 6% on a low base in CY2020, Global GDP growth rate normalized to 3.4% for CY2022 International Monetary Fund (IMF). At the same time, Global inflation rose from 4.7% in 2021 to 8.7% in 2022 (IMF). Rise in inflation was fueled by various factors including the release of pent-up demand post pandemic and supply chain disruptions due to after-effects of pandemic and US-China economic war. Excessive monetary easing by various countries post pandemic intensified the impact. Finally, the Russia Ukraine conflict exacerbated the inflation issue due to disruptions in natural gas, wheat and fertilizer supply. In order to fight rising inflation central banks around the world reversed their policies from monetary easing and started tightening liquidity. Given such developments, while inflation levels have recently started to soften, an adverse impact on global growth is to be expected. IMF has revised downward the global GDP growth forecast for CY2023 to 2.8%.
United States recorded an inflation rate of 8.3% during CY2022. To counter the same, US Federal Reserve have hiked interest rates to 5.00 – 5.25% from 0.25% during COVID. Such an unprecedented rise in interest rates has been designed to slow down the economic growth. However, despite the actions by the Central Banks, inflation has proved to be rather sticky, and economic activity, particularly in USA, has not slowed adequately in line with Federal Reserve estimates. However, it also resulted in the collapse of three regional banks in United States including First Republic bank, Silicon Valley Bank and Signature Bank. United States recorded a GDP growth of 2.1% during 2022, which is expected to further slowdown to 1.6% in 2023 as per IMF.
Europe seems to be among the worst impacted by the Russia Ukraine conflict. Initial expectations did not envisage a prolonged war, but the continuing conflict created scarcity of many products and disrupted the still recovering supply chains. Europe, in particular, was deeply impacted on account of its strong dependence on natural gas and food supplies from Russia and Ukraine. The European Central Bank (ECB) has also been hiking interest rates to counter rising inflation, which has compounded the negative impact on economic activities. Interest rate as declared by ECB now stands at 4%. Euro area GDP growth for 2022 was recorded at 3.5%, while as a result of above-mentioned factors, the same is projected by IMF at 0.8% for 2023. Germany is expected to record a degrowth of 0.1% during 2023. China recorded a GDP growth of 3% during 2022, mainly because of its very delayed repeal of zero COVID policy. Given the gradual economic recovery and easing supply chain disruptions, Chinas GDP is expected to grow at 5.2% during 2023 as per IMF. However, this growth forecast may undergo a downward revision given weak recent macro-economic indicators coming out of China, including stagnation in investments, shrinking trade numbers, falling prices etc.
Indian economic scenario
Among all the global economic and geo-political turmoil, India has remained a bright spot in the world economy. India ended FY 2022-23 on a strong footing with a GDP growth of ~7% despite headwinds from ongoing Russia-Ukraine conflict, high levels of inflation and rate hikes by RBI.
FY 2022-23 began in the backdrop of the challenges posed by the rising inflation brought on by the Russia Ukraine conflict. Globally, pricing for crude oil, natural gas, food and fertilizers rose substantially. While India has traditionally been playing a balancing act in line with its policy of non-alignment, it has not been immune to negative economic consequences of such conflicts. India was particularly hit due to high crude oil prices. However, the government proactively mitigated this challenge by sourcing crude oil supplies from Russia at a significant discount to prevailing crude oil prices.
With the third COVID wave receding in Q1 2022, fears of pandemic took a back seat. As such consumer demand for a large variety of goods and services gained momentum. In particular, strong traction was witnessed in travel and hospitality, allowing the aviation sector to recover strongly during FY 2022-23. Such additional demand also fueled the supply side driven inflation. Despite the mitigation measures taken by the government, India still had to suffer an initial inflation shock, which took consumer inflation to a level of 7 to 8%. To counter such high levels of inflation, Reserve Bank of India sprang into action and started increasing interest rates from May 2022 and ended FY 2022-23 with the repo rate at 6.5%, a 250 bps rise during the year. Fruits of these actions are now becoming visible with inflation starting to soften.
Simultaneously, in order to mitigate negative impact on economic growth from rate hikes, Government of India continued to enhance spending via infrastructure investments, subsidies, performance linked incentive scheme, etc. To push growth in the economy and revive private capex, the governments capex spending target was increased by around 33% to Rs. 7.5 lakh crore for FY 2022-23, with major emphasis on infrastructure and technology.
During the first half of FY 2022-23, Indias forex reserves fell from around USD 600 Bn to USD 530 Bn mainly due to high crude oil prices and foreign investors pulling out money from India equity markets amid interest rate hikes. However, during the second half investor confidence seemed to have been restored and coupled with falling crude oil prices, Indias forex reserves zoomed again to above USD 590 Bn mark.
Performance of Indian rupee also remained satisfactory, depreciating from around Rs. 76 to around Rs. 82 per USD in 1st half of FY 2022-23, largely due to effects of Russia-Ukraine war but remaining within the range of INR80 to Rs. 82 per USD since the 2nd half of FY 2022-23. Despite this currency depreciation, the Indian Rupee remained among the best performing currencies in the world.
Inflation numbers remained high during the year and only started softening during the second half as a result of normalization of commodity prices and high interest rates. WPI (Wholesale price index) inflation came down from a high of 13.88% during June 2022 to around -3.5% in June 2023. Similarly, CPI (Consumer price index) inflation came down from as high as 7.8% in May 2022 to 4.25% in June 2023.
GST collections continued to grow throughout the year indicating good economic activity. Monthly GST collections improved from Rs. 1.41 Trillion in May 2022 to Rs. 1.87 Trillion in April 2023. Other indicators like Manufacturing PMI and Services PMI also saw marked improvement throughout the year indicating robust economic and investment climate in India.
Way forward
As the world moves ahead of the pandemic, the geo-political context is characterized by a more multi-polar world, where countries are driven more by their individual requirements rather than through their traditional strategic partnerships. The Russian-Ukraine conflict is a consequence of the brinkmanship between Russia and NATO and no easy solution appears to be in sight. In addition, Chinas ambitions have also created friction with the US and other major economies in the Asia Pacific region. The US-China economic war on Technology and Chip related issues have further exacerbated an already fragile supply chain. Chinas BRI (Belt and Road initiative) has left a number of developing countries, already struggling to recover from the pandemic, on the verge of bankruptcy.
With rising oil prices, the Middle East has once again emerged with capital surpluses, ready to play a greater role moving ahead. Both United Arab Emirates and Saudi Arabia have significant plans to grow infrastructure and strengthen their economies.
India has emerged stronger during this period. As India was able to roll-out vaccines to cover a large part of the population, and through its ability to keep the domestic economy going after the initial covid period, it was in a strong position to grow in the post pandemic era. In this emerging post pandemic multi-polar context, many global corporations are wary of continuing to depend substantially on China for their sourcing and manufacturing requirements. Over the past few years, India has rolled out various taxation incentives and specific Production-Linked-Incentive (PLI) Schemes for manufacturing in specified sectors. With the strong domestic market poised for strong growth as India per capital increases, combined with the young demography and trained technical manpower available in India, these additional incentives have been a key reason for many global corporations to consider India as a manufacturing destination. Given the complexity of decision making and gestation period for manufacturing investments, these investments are likely to be rolled out over the medium term.
As such, the recent accelerated pace of economic reforms of the last few years in the domains of fiscal, digital and physical infrastructure, has positioned India for higher and sustainable growth. This, together with the largest, broadest and deepest labor pool, with a relatively inelastic labor market, provides a long runway for improving productivity at a pace faster than growth in wages. This enhances the global competitiveness of enterprises doing business in India. The digital public infrastructure and its adoption by people, provides India a unique competitive advantage of not only reducing the cost of doing business, but also formalizes the economy and supports financial inclusion and creates new business opportunities.
The spurt of new-age companies across technology and other sectors on the back of rapid digitalization and strong capital availability would be instrumental in delivering differential growth to the Indian economy.
Acceleration in infrastructure investment, especially transportation and logistics, is directly boosting growth while steadily improving competitiveness for enterprises. After massive upgrades in roadways, the focus is now on rail, air, water transport along with the ‘Gati Shakti initiative which is aimed to improve intermodal visibility and synergies. Investment in physical infrastructure is being supplemented by IT-based ease-of-doing-business initiatives such as the National Logistics Policy which aims to increase the speed and lower the cost of movement.
The National Infrastructure Pipeline (NIP) of USD 1.4 trillion underpins the large infrastructure investment opportunity in India, duly supported with tax concessions for Sovereign Wealth and Pension Funds and an enabling market for Infrastructure Investment Trusts (InViTs) to monetize developed infrastructure assets and free up capital.
Improving the ease-of-doing-business parameters and reducing the regulatory and compliance burdens for enterprises in India, would be key to enhancing competitiveness.
Infrastructure initiatives announced
The financial budget for FY 2023-24 aimed to serve as a blueprint for future growth and building an inclusive and empowered economy. The budget prioritized growth in infrastructure and investment, last mile connectivity, green growth and financial sector growth among other targets.
In a major boost to infrastructure and economy, the budget entails a 33% growth in capital expenditure outlay at Rs. 10 lakh crore. Further, in order to spur growth in priority sectors, the Union Budget 2023-24 earmarked Rs. 8,083 crore for Production-Linked Incentive (PLI) schemes, a major allocation going towards large-scale electronics manufacturing, pharmaceuticals, automotive and automotive components, and food processing.
The Union Budget 2023-24 also highlighted ‘Green Growth among the key priorities in the economic agenda. With a clear intent to boost investment in the green energy space, the budget provides a capital outlay of Rs. 35,000 crore for energy transition. A Green Credit Program is to be notified under the Environment (Protection) Act to incentivize and mobilize additional resources for environmentally sustainable and responsive actions. These steps are aimed to create a sustainable energy mix and the required energy infrastructure framework attracting further investments.
Additionally, in a bid to boost the MSME sector, a revamped credit guarantee scheme has taken effect through infusion of Rs. 9,000 crore in the corpus. This scheme is expected to enable additional collateral-free guaranteed credit of Rs. 2 lakh crore and reduce the cost of the credit by about 1 per cent.
Despite the above-mentioned major capital allocation, the government intends to improve fiscal discipline. In this direction, the fiscal deficit target for FY 2023-24 has been set at 5.9%, a 50bps reduction over the past years target.
Impact on sectors in which GIL operates.
The civil aviation industry in India has been one of the fastest growing industries. With exception of the pandemic period related disruption, the industry has grown by leaps and bounds in the recent years. India is the third largest domestic aviation market in the world and is expected to overtake UK to become the third largest overall (domestic + international) air passenger market in the world by FY 2023-24. Further, as per International Air Transport Association (IATA), Indian aviation market is expected to overtake US and China by 2030. Aviation sector plays a significant role in economic development of a country. Indian aviation contributes approx. 5% of nations GDP. It offers global connections, which are crucial in advancing international business and trade. Further, it boosts tourism and thus is a major driver for the travel and tourism industry. It not only transports passengers, but also air cargo, which boosts trade of high value and perishable products. The government recognizes this and the need to accommodate the fast-growing aviation traffic in India. Thus, various steps are being taken to boost growth of the sector. The government, in 2017 introduced the UDAN regional connectivity scheme, which aimed to make air travel more accessible and affordable for public and thus increase air traffic in Tier II and Tier III cities. This initiative has had impressive results and has led to a significant increase in air traffic from Tier II and Tier III cities. The Government has further planned to revive 50 airports to improve regional air connectivity around India. Apart from this, there are also plans to make additional heliports, advanced landing grounds and water aerodromes. Ministry of Civil Aviation anticipates growing number of airports in India from current 148 to 230-240 by the year 2030. Further, the government is also taking appropriate steps to develop large scale airports (including Delhi International Airport) as global air traffic hubs.
Given the attractive sector growth prospects, the airline players are also charting their investments in line with sector growth forecasts. Various airlines operators including TATA and Indigo have planned a massive expansion of their fleets. Air India signed agreements to purchase 250 Airbus planes, split between 210 single-aisle A320neos and 40 wide body A350s, and 220 Boeing aircrafts including 190 narrow body 737 MAX jets, 20 wide body 787 and 10 777Xs. Similarly, Indigo placed order for 500 Airbus A320 aircrafts. Airlines are expediting addition of wide body planes to enhance reach and contribute towards developing Indian airports as global air traffic hubs. In fact, the current fleet size in India is expected to grow from current ~700 to 1200-1400 by 2030.
Key developments at GIL
Over the past few years, we have consolidated our position, focused on addressing, rationalization and management of corporate debt and stressed assets while building a platform for growth for the future. We have taken many significant steps in implementing our stated strategy to strengthen the balance sheet through improved cash flows from increased profitability, debt reduction through asset monetization, value unlocking and prudent working capital management while creating avenues for growth.
In this direction, last year in a bid to create value for investors and attracting sector focused investor capital, GIL had completed its restructuring initiative, under which, the group underwent a vertical de-merger of its airport and non-airport businesses. Post the de-merger, GIL emerged as Indias only pure-play listed airport company. This year too, the company has taken up various initiatives to strengthen its position as one of the largest private airport developers in the world.
As you are aware, in 2020 we had entered into strategic partnership with Paris based Groupe ADP to create a world-class airport platform, whereby Groupe ADP had purchased 49% stake in GMR Airports Limited (GAL), a subsidiary of GIL. At the time of the agreement, it was our endeavor not only to raise capital, to strengthen our balance sheet, but also to simplify the corporate structure as we go forward. Thus, the company has undertaken a significant decision to restructure GIL and prepare for a new growth phase through Composite Scheme of Amalgamation and Arrangement whereby GMR Airports Limited, the existing airport platform, would be merged into GIL in a step approach. The said Scheme will be filed with the National Company Law Tribunal (NCLT), in terms of the applicable laws.
The merger would result in cementing further the relationship between GMR and Groupe ADP. In addition, it will enable an earlier settlement of the earnouts for GIL, which were agreed at the time of investment by Groupe ADP in GAL.
As part of the understanding related to the merger, Groupe ADP has subscribed to FCCBs issued by GIL, which will be used to further deleverage the company and settle most of the contingent liabilities related to GPUIL/its subsidiaries, which are a legacy of the pre-demerger period. As part of this transaction, GIL has raised approximately €331 million, or about Rs. 2,930 crores, from Groupe ADP through a 10-year 6.76 % per annum simple interest coupon FCCB due in 2033.
The approval/NoC from Competition Commission of India, stock exchanges and Reserve Bank of India have been obtained for the Scheme of Merger.
In another boost to our expansion targets, GMR Airports Limited and National Investment and Infrastructure Fund (NIIF), in December 2022 announced a financial partnership under which NIIF will invest in three airport projects. In this direction, NIIF has already invested Rs. 631 crores in GMR Goa International Airport Limited in the form of Compulsory Convertible Debentures (CCD).
In line with our strategy of deleveraging and redeployment of capital, GIL announced in September 2022, sale of its stake in GMCAC (CEBU airport Philippines) to Aboitiz InfraCapital. The transaction was completed by December 2022 and consideration with respect to the same was received. GIL will continue to hold 33% stake in the asset until September 2024 and will also operate the airport as technical services provider till December 2026. It will also be eligible to receive additional consideration as earnouts linked to the financial performance achieved by GMCAC over the period until December 2026.
In terms of business development GMR had emerged as the winner for the bid to develop and operate Kualanamu International Airport in Medan, Indonesia in November 2021. GMR Group holds 49% equity in the airport SPV, while the remaining 51% is held by PT Angkasa Pura II, a state-owned airport operator of Indonesia. The project scope includes operation, development, and expansion of the airport over a period of 25 years. In July 2022, post completion of all conditions precedent, the SPV started operating the airport. Traffic recovery post COVID at Kualanamu airport has been impressive and it handled a total of 5.8mn passengers in CY2022.
On the domestic front, in a major development, we commissioned the Mopa international airport project at Goa on December 07, 2022. The project was inaugurated by the Honble Prime Minister of India on December 11, 2022. The airport commenced domestic operations on January 5, 2023, while the international operations began in July 2023.
In another development, we are soon to start construction at our Bhogapuram airport project. The foundation stone for the project was laid by the Honble Chief minister of Andhra Pradesh in May 2023. With a joint survey of land in progress, construction works are expected to start soon.
In terms of organic expansion at our existing airports, a few years ago we had taken up massive expansion projects at our Delhi and Hyderabad airports. These expansion projects are in the advanced stages and expected to be completed within FY 2023-24. With these projects completed, passenger handling capacity at Delhi International Airport will stand at 100mn passengers per year, while Hyderabad International Airport capacity will be enhanced to 34mn passengers per year.
With respect to Nagpur airport, where GMR had emerged as the highest bidder in March 2019 and subsequently the bidding process was annulled by the authority in March 2020, Honble Bombay high court had quashed the award cancellation letter and directed the concerned authority to sign concession agreement for Nagpur Airport with GMR. In another relief to GMR, Honble Supreme Court too had upheld the High Court order. In further developments during FY 2022-23, on August 12, 2022, Honble Supreme Court dismissed the Review Petitions filed by MIHAN India Limited, Government of Maharashtra & AAI upholding the earlier order of Supreme Court to execute the concession agreement for Nagpur Airport. Review Petition was subsequently filed by MoCA in Honble Supreme Court challenging the Supreme Court Order that got dismissed by Court in its Order dated May 11, 2023.
On an overall basis, GMR Group operated airports, during FY 2022-23 handled a total of more than 100mn passengers (Including passengers handled at Delhi, Hyderabad, Mopa, CEBU and Medan airports). Our Indian portfolio of airport assets handled 87mn passengers during FY 2022-23, thus forming a 26.6% market share of all India traffic (Domestic traffic share of 25.1%; International share of 33.5%). With a lot of organic and inorganic expansion on the way, we expect to improve this share in coming years.
While we expand our footprint across India and other geographies, we continue to ensure and strive for operational excellence at all our airport assets. Both Delhi International Airport & Hyderabad International Airport continue to maintain an ASQ (service quality rating) of 5.00. Further, Delhi International Airport improved its Global Skytrax airport ranking to 36th in the world, while Hyderabad improved its ranking to 65th. Delhi International Airport was conferred with "Best Airport in India and South Asia" in the World Airport Awards by Skytrax, for 5th year in a row, while it was adjudged the "Cleanest airport in India and South Asia" for 3rd year in a row. Delhi International Airport was also recognized and awarded by ACI as the "Best Airport in Asia Pacific" by ACI-ASQ for 2022 along with the accolade on Cleanest Airport in the region. Similarly, Hyderabad International Airport was recognized as the winner of the 2022 Airport Service Quality (ASQ) Award for Best Airport of 15 to 25 Million Passengers in Asia-Pacific. It was also conferred the "Best regional airport in India and South Asia" by Skytrax rankings.
At GMR, our commitment to the cause of Nation building is through creation of quality assets. We are proud to be associated with landmark infrastructure projects in India like Delhi International Airport, Hyderabad International Airport & Goa Airport at Mopa etc. We strive to continue developing more such marquee infrastructure assets in service of the nation.
Airport Sector Outlook and Future Plan Airport Sector
The aviation industry across the globe faced an unprecedented situation due to the COVID-19 outbreak. This resulted in near wipe out of passenger traffic across airports in India and across most parts of the world before a gradual opening up and recovery. FY 2022-23 was the first year after Covid where we had unrestricted scheduled operation for domestic and international movement. While domestic traffic recovery exceeded the pre-COVID level, international traffic reached to about 85% - 90% of pre-COVID level by fiscal year end. In addition to the pandemic, Russia – Ukraine conflict has also presented significant impact on global aviation industry in the form of restrictions on travel related air-space usage. However, as per our assessment, while impact in terms of passenger traffic to Russia, CIS and Eastern Europe was limited, we had a significant impact on cargo volume led by supply chain impact and higher inflation.
Globally, Airlines have struggled with weak Balance Sheets post Covid, and the impact of geo-political issues like the Ukranian conflict, high oil prices, high inflation, supply chain issues and regulatory cost burdens being added to address sustainability issues. Airlines have struggled to bring back full capacity over the period, and parts of the world, including in particular South-East Asia, took time to fully open up. IATA reported that the aviation sector reported deepest net losses in history to an extent of US $183.3 billion for 2020 to 2022. IATA has however projected a much better outlook for FY 2022-23 as China and Southeast-Asia has opened up and fuel cost has become more manageable.
As a consequence of the above supply side issues, while post pandemic demand has been high, constraints such as limited visa availability and high ticketing costs have been a dampener for most international flyers.
Given that India has a large domestic market, its recovery has been relatively stronger. Further, given that air travel was established as a safe mode of travel, it appeared to encourage many first-time travelers to travel by air. International travel has also picked up across the world given easing of restrictions imposed by various governments. These restrictions were particularly stringent in Asia Pacific region, as a result of which while inter-region international traffic recovered well, intra-region traffic recovery was sluggish.
During the year, we were also able to expand the network to new destinations. This will further accelerate growth trends post recovery as new destinations and flyers join the system.
While the Indian aviation sector rebounded well from pandemic lows, the sector faces a number of headwinds. Due to maintenance and engine issues, about 10% of Indian airlines fleet was grounded during the year. Worst affected due to this issue were airlines like GoFirst and Spice Jet. The demand from passengers was high, but shortage of aircraft created a supply side constraint, and along with high aviation fuel pricing, lead to high air fares. This situation is however expected to be mitigated in due course as major airlines including Air India and Indigo have placed huge orders for both narrow and wide body aircrafts. Due to such investment initiatives by airlines, Indias fleet size is expected to increase from current ~700 to >1400 by 2030. While domestic recovery in India has been strong, it has been achieved despite the challenges of high tariffs caused by these supply side constraints.
Looking back, it may be noted, that amid rapidly changing regulations across countries in view of the pandemic, airports were forced to adopt and implement new regulations at a very short notice. Our airports excelled in implementing such protocols while also ensuring passenger convenience, operational efficiency and financial stability. Such challenges have instilled a spirit of operational flexibility at our airports.
GMR is proud to mention that it has done exceedingly well in the current situation and has proactively implemented contingency plans and adapted wherever needed by developing new ones. We have focused all our efforts towards facilitating a safe and reliable journey for our passengers. GMR airports have been one of the first airports to implement DigiYatra, which is contactless biometric passenger processing by leveraging technology.
Further, in a bid to foster a culture of innovation within the organization and build a philosophy of open innovation that enables free flow of ideas and resources between GMR and external ecosystem partners, the Group had earlier launched a platform called GMR Innovex. To pursue such goals, we continue to interact, engage and collaborate with start-ups, academic research Institutes, ecosystem players and other companies in developing both digital & non-digital next generation solutions.
Airport Land Development (ALD)
ALDs business model has been evolving in the past couple of years. There has been a paradigm shift from a pure land lease monetization model to adding more investment / self-development / partial development projects that help in value maximization.
Infrastructure development will continue to remain our key focus area with integration of smart city principles in the same. The quality and turnaround time for our development projects is expected to improve as we continue to expand our portfolio of projects.
Our focus on creating independent financing capabilities and creation of multi-airport asset platforms viz. for hospitality and retail remains and expected to take shape by the end of FY 2024/2025.
Building on the capability created within the ALD team for all facets of the project cycle, we foresee expansion of ALD footprint in Goa and Bhogapuram airports.
Economic Regulation & Airport Tariffs Tariff at Delhi International Airport:
Control Period 3 Order: The Airports Economic Regulatory Authority (AERA) earlier issued order no. 57/2020-21 for third control period on December 30, 2020, allowing the Company to continue with BAC+10% tariff for the balance period of third control period plus compensatory tariff in lieu of Fuel Throughput Charges. AERA has allowed the Company to levy compensatory tariff in lieu of Fuel Throughput Charges on ticket issued on or after February 01, 2021, at the rate of Rs. 65.98 per embarking passenger up till March 31, 2021, and Rs. 53.00, Rs. 52.56 and Rs. 51.97 for FY 2021-22, FY 2022-23, and FY 2023-24 respectively.
DIAL Appeals
• DIAL had filed appeal before Honble Supreme Court on July 21, 2018 against TDSAT order dated April 23, 2018 with respect to First Control period. The Judgement was pronounced by Honble SC on July 11, 2022 where all appeals were dismissed, except on issue relating to aeronautical tax, where DIALs contention has been accepted basis the below Para:
• Para 117 form SC order "Thus, the aforesaid is the only aspect on which we are inclined to interfere with the impugned orders and find merit in the contention of the Airport Operators that the Annual Fee paid by them should not be deducted from expenses pertaining to aeronautical services before calculating the ‘T element in the formula".
• Further, the Judgement on DIALs appeal related Cargo handling (CHS) and Ground Handling (GHS) was pronounced by TDSAT on January 13, 2023, where TDSAT referring to its own judgment dated April 23, 2018 and Honble SC Order dated July 11, 2022 reiterated that CHS and GHS are non-Aeronautical services in nature as per OMDA. Since, CHS and GHS are non-aeronautical as per the OMDA and SSA, DIAL also has the power to determine tariff for both the services. In view of the order issued by TDSAT, AERA has further appealed before the Honble Supreme Court where hearing is scheduled for August 2023.
In respect to CP-2 & CP-3 appeal at TDSAT, TDSAT has pronounced its order on July 21, 2023 in which TDSAT has allowed certain claims of DIAL. Implementation of these claims will result in higher aeronautical tariff at Delhi International Airport.
Tariff at Hyderabad International Airport:
Control Period 3 Order: AERA had earlier issued tariff order no 12/ 2021-22 for third control period i.e. 1st April 2021 to 31st March 2026 on 31st August 2021. AERA decided to consider YPP (Yield per passenger) for CP-3 as Rs. 429.74. AERA approved UDF from INR 281 to Rs. 750 per domestic departing passenger and from Rs. 393 to Rs. 1,500 per departing international passenger. Due to the pandemic scenario, authority had restricted increase in tariff and allowed GHIAL to recover the shortfall of eligible ARR for third control period to the tune of Rs. 669 crore in fourth control period as part of true-up exercise.
GHIAL Appeals: GHIAL had filed an appeal against some of AERAs decision in third control period order on September 30, 2021 with TDSAT. The appeal was listed on March 08, 2022 for preliminary hearing. TDSAT has admitted the appeal and AERA has filed its reply on April 22, 2022. The hearing has been adjourned to July 17, 2023.
Tariff at Goa Airport at Mopa:
Control Period 1 Status: GGIAL filed its MYTP for tariff determination on January 07, 2022. GGIAL also requested for an ad-hoc tariff on April 18, 2022 due to long lead time for final tariff order. AERA in view of the request, had issued an Ad-hoc tariff for GGIAL on August 26, 2022 where, Landing and Parking charges including VTP (Variable tariff plan) was approved, and UDF (User development fee) of Rs. 450 per departing domestic passenger and Rs. 1,100 per departing international passenger was also approved.
Since, the Ad-hoc tariff for GGIAL was valid till March 31, 2023, AERA on March 22, 2023, had extended the tariff for Mopa, Goa airport at same rates for a period of 6 months ending September 30, 2023 or till the determination of tariff whichever is earlier.
Tariff at Medan Airport:
Post completion of all the Conditions Precedents, the Airport operations commenced on July 07, 2022. Simultaneously, Ministry of Transport, Indonesia approved increase in Passenger Services Charges (PSC) effective from August 01, 2022. As a result, Domestic PSC increased by 28% and international PSC increased by 16%.
Growth Outlook – New Opportunities
Though aviation sector has been going through unprecedented challenges this year due to post pandemic effects and Russia-Ukraine conflict, at GMR Airports we have strategized to convert these challenges into opportunities. Groups resilience and agile strategies have been helpful in navigating through the current challenges and at the same time charter new growth territories.
In line with our larger strategy for airports business, we believe that Airport business has huge underlying strength. Now with combined expertise and reach of both GMR and Groupe ADP, we are strategically much better placed to further scale of the airports business both in international and domestic markets.
As part of our Growth Strategy, we are actively looking to add Airport Concessions to our portfolio, both in India as well as overseas. In addition, we are also looking at an asset-light Operations & Maintenance (O&M) Business Model. In particular, in the Middle East, we are actively tracing and pursuing a number of emerging opportunities on the O&M model. Given our strong Airport Knowhow/ Expertise, and availability of cost-effective talent in India, we believe we should be well positioned to target such opportunities. Further, in line with our strategy, growth will also be driven by greater participation in the Airport adjacency businesses.
Domestically, GMR is actively pursuing opportunities for new airports as and when they arise. As per the national monetization plan, Government is planning for privatization of 25 airports in four phases. In our immediate sight is the opportunity of next round of regional airports privatization. We will be actively pursuing the upcoming round of airport privatization.
Outside India, the Group is strategically focusing in promising geographies of South Asia, South East Asia, Middle East, Africa, Central Asia and Eastern Europe. We are actively evaluating and participating in multiple airports privatization opportunities in these geographies. Given our track record in Cebu, Clarke and Medan, we are very well positioned in South-East Asia. We have already created a very healthy pipeline of airport concessions and O&M opportunities in these regions. We anticipate that a number of Concession and O&M opportunities are likely to come up for bidding in the next two-year period, as countries recovering from Covid, plan for the next phase of airport infrastructure enhancement.
GMR Airports Business is conceptualized as a platform with airport concessions being the core and a range of adjacent businesses built around the same. Our rich experience over the past decade of operating in diverse markets in the developing world has given us a unique understanding of drivers and a rich understanding of the various adjacency businesses.
As a result, we pushed forward with Groups vision to diversify and expand in the airport adjacency space. We are currently evaluating multiple opportunities in the cargo, duty free and services business across the geographies and believe that in the short to medium term we will have more adjacency businesses to add to our overall portfolio. We have created a richly experienced team at GMR Airports to drive our vision for airport adjacencies.
We broke ground in this direction with launch of Kannur Duty Free operations in February 2021, notwithstanding challenges due to the COVID pandemic. We also evaluated duty free opportunities in Mumbai, Indonesia, South Korea, and other geographies and this has enhanced the groups understanding of international duty-free space.
At the same time, Group is also looking to unlock value from its existing non-aero commercial businesses. This year, we launched a range of initiatives to enhance the value creation in our non-aero businesses. As a first step, we have launched non-aero Centre for Excellence (CoE) for duty-free and cargo businesses. Under the CoE initiative, we are going to channel the collective non-aero wisdom of the group to achieve commercial excellence.
As we look forward into post -COVID future, we have a robust pipeline of airports and five strategic business units of adjacency opportunities and we believe that they will add significant value to the Group and all stakeholders.
Indira Gandhi International Airport (Delhi International Airport) – operated by DIAL
Focus Areas for FY 2023-24
In FY 2022-23, Delhi International Airport handled 65.3 Mn passengers and 0.90 MMT of cargo volume. It recorded a 66% increase in passenger traffic and 3% decrease in cargo volume over previous year. During the year, Delhi International Airport passenger and cargo market share was 20.0% and 28.4% respectively amongst all Indian airports. DIAL was once again recognized as the ‘Best Airport for service quality in the region by ACI and ‘Best Airport in South Asia by Skytrax. Delhi International Airport continues to be the leading Airport among all Indian airports in both passenger traffic and cargo handled. During the year, Delhi International Airport has retained its Global 4 Star Airport rating by Skytrax based on Airport Quality audit conducted in the month of November 2022. Also, in the newest category in ACI ASQ award, DIAL has been bestowed with ‘Cleanest Airport in the Asia Pacific region award.
During the year, Delhi International Airport was able to enhance the domestic connectivity within India by connecting to several new destinations, and further passenger surveys showed that highest ever number of first-time passengers started flying over the past year. Towards the end of fiscal year FY 2022-23, recovery in the domestic traffic reached beyond pre-pandemic levels. As Government had removed restrictions on operation of scheduled international flights, international passenger traffic has also witnessed robust recovery barring countries such as China and Hong Kong.
DIAL domestic traffic nearly reached the pre-pandemic level on an annual basis in FY 2022-23. It is expected to surpass the international traffic of pre pandemic level by end of FY 2023-24. DIAL will continue with the necessary capacity expansion initiatives of its airside infrastructure and terminal capacity as per the approved Major Development Plan in order to cater to the future growth in passenger and air traffic. Phase 3A expansion, which includes, among others, expansion of Terminal 1 and Terminal 3, construction of a fourth runway along with enhancement of airfields and construction of taxiways, will expand Delhi International Airport capacity to around 100 Mn passengers annually is to be completed during FY 2023-24. DIAL continues to work with all stakeholders including the airlines to further establish Delhi International Airport as an international hub airport for passengers and cargo. The Government of India is very keen and supportive of Delhi International Airport emerging as the leading hub in India, and a number of initiatives have been launched to achieve the same. In line with this goal, DIAL will continue to work towards reopening key international destinations gradually in alignment with the removal of international border restrictions. DIAL will continue to work with domestic and international carriers to boost long haul flights as well as dedicated freighters coming into Delhi. The airport has also taken up various ESG initiatives with special focus on Net Carbon Neutrality. With India pledging to reach the Net Zero Carbon status by 2070, MoCA has started directing airports to plan for the same. DIAL has thus updated its Environmental Sustainability Policy in line with ESG requirements. DIAL is currently at Level 4+ of the ACI Carbon Accreditation level and has set a target to become a net zero carbon emission airport by 2030.
Rajiv Gandhi International Airport (Hyderabad International Airport) operated by GHIAL
Focus Areas for FY 2023-24
During the financial year, Hyderabad International Airport handled 21.00 million passengers, 1,60,597 Air Traffic Movements ("ATMs") and 1,42,338 Metric Tonnes ("MTs") of Cargo. On a year-on-year basis, passenger movements and ATMs witnessed a growth of 69% and 40%, respectively. Cargo witnessed around 2% YoY growth.
At GHIAL, during FY 2022-23 we achieved a domestic traffic which surpassed the pre-COVID levels on an annual basis despite lower ATMs indicating a higher PAX/ ATM on account of higher utilization and bigger aircrafts. International traffic has remained robust, growing steadily and we expect to exceed pre-COVID levels during FY 2023-24.
We leveraged opportunities like Medical tourism to start operations to Dhaka and Baghdad but at the same time destinations like Chicago and Male were stopped by airlines due to their internal business cases for the routes vis-?-vis other routes.
By end of the year, Hyderabad International Airport was connected to 66 domestic destinations as compared to pre-COVID level of 55 domestic destinations and 18 international destinations as compared to 16 pre-COVID destinations.
We are also in talks with several international carriers to start their operations from Hyderabad for the first time / resume operations. For example, Lufthansa has officially confirmed a direct flight between Frankfurt and Hyderabad from January 2024 and we are hopeful to start several others as well.
With its strong business fundamentals, strategic and competitive advantages, and initiatives to sustain and grow the business, GHIAL is well-positioned to return to the growth path.
In order to accommodate future traffic growth, GHIAL continues with necessary capacity expansion initiatives to its airside infrastructure and terminal as per approved development plan. In this direction, we are nearing completion of a major expansion phase, which will enhance the current passenger handling capacity at Hyderabad International Airport to 34 million passengers per year.
Passenger experience has always been at the forefront of our operations and this year we have planned several initiatives regarding the same with many of them being in the final stages of implementation. In FY 2023-24 we have planned the Skytrax Audit with an aim of increasing our rating from the current 3 Star to 4 Star. We continue to provide the exceptional service quality that has earned us the award for the ‘Best Airport Staff in the region. Our focus would be to continue with the ACI ASQ score of 5.00 which we have been maintaining for the last few years. Further, GHIAL has applied for Level 1 of ACIs Airport Customer Accreditation which we aim to achieve within Q1 of FY 2023-24 and subsequently we will apply for Level 2.
Hyderabad International Airport was recently ranked as the ‘Most Punctual Airport in the world by the aviation analytical firm Cirium, which is a testament to our operational excellence and our continuous efforts towards achieving the best.
ESG initiatives have been taken up and Net Carbon Neutrality in particular. With India pledging to reach the Net Zero Carbon status by 2070, MoCA has started directing airports to plan for the same. GHIAL is currently at Level 3+ of the ACI Carbon Accreditation level and we have submitted our application for Level 4+. We are in the process of finalizing our Net Carbon Zero plan for Scope 1, 2 & 3. Further, GHIAL is the first airport in India to have Integrated Online Environmental Monitoring Station.
Manohar International Airport – Mopa (Goa Airport at Mopa) operated by GGIAL
Focus Areas for FY 2023-24
GGIAL has started the domestic operations on January 05, 2023 and the international Operations in July 2023.
As per the performance of Q4 FY 2022-23 and so far in the Q1 FY 2023-24, GGIAL is handling 75 ATMs per day. With the usual high traffic in Goa during the winter season, the airport is expecting demand from the airlines in the Winter Schedule 24 and we are expecting to handle 7 MPPA annualized traffic by FY 2023-24. Considering, growing demand from airlines and high passenger footfall, we are already planning expansion in the terminal capacity from the existing 4.4 MPPA to 7.7 MPPA.
The construction of a 6-lane expressway connecting the airport to the NH-66 is scheduled to be completed by March 2024. Upon completion, the expressway will provide a seamless transition for passengers to and from the airport.
With commencement of international operations on horizon and with a hopeful terminal expansion plan to be executed, GGIAL is focusing on providing best-in-class services to passengers and generating maximum value to its shareholders.
Mactan-Cebu International airport
In Philippines, as part of Southeast Asia, the impact of COVID-19 pandemic continued in CY2022 also. As such, the recovery path was much slower and longer than what we experienced at our airports in India. The passenger footfall for CY 2022 was recorded at 5.5 Mn, constituting of 4.8 Mn Domestic passengers and 0.7 Mn International passengers, witnessing a 420% growth from 1.3 Mn overall traffic in CY 2021. However, the total traffic for CY22 recovered to only 44% of pre-pandemic levels.
Philippines consistently eased Covid-19 restrictions, reaching the least restrictions by Q4 CY22. Philippines also witnessed brisk economic recovery, clocking 7.6% GDP growth in 2022. Supported by the relaxations & strong economic recovery, air traffic bounced back recovering to 60-65% of pre-pandemic levels in December 2022. This was aided by the re-instatement of routes and ramping-up of seat capacities by domestic airlines and re-starting of major international routes. The recovery has continued in CY 2023 with total traffic at 72% of pre-pandemic levels in March 2023.
GMCAC continued to follow the Zero-based budgeting approach to optimize costs as we prepared for the recovery. As part of it, GMCAC continued to be under slab-based pricing with the key service providers and a consolidated single-party facilities management to achieve further savings.
The rectification work for the Typhoon works was completed on-time and as traffic recovered, we resumed two-terminal operations in a phased manner with all Domestic sectors moved to T1 and International sectors to T2 by October 2022.
GMCAC also regularly worked on initiatives that can effectively utilize our infrastructure with activities such as Bazaar Concepts, and other events to improve Retail and F&B sales. As traffic recovered, majority of the commercial outlets were re-opened in both T1 and T2. We also refreshed our commercial offerings in T1 after the typhoon rectification works adding multiple F&B and retail options in the Terminal 1 Airport village and North-wing.
In line with our strategy to churn assets and redeploy capital in high growth opportunities, GMR Airports International BV (GAIBV), a stepdown subsidiary of Company holding stake in GMCAC on December 16, 2022, entered into a transaction with Aboitiz InfraCapital Inc (AIC) for sale of stake. This transaction has now been completed and upfront consideration was received. GMR Group though will continue to hold 33% stake in the asset until September 2024 and will also operate the airport as technical services provider till December 2026. It will also be eligible to receive additional consideration as earnouts linked to the financial performance achieved by GMCAC over the period until December 2026.
In 2023, while global economy is expected to stabilize with headwinds from inflation and other macro-economic factors, Philippines continues to be a bright spot with a forecasted GDP growth of 6-7%, highest among the ASEAN countries. With all restrictions eased for domestic travel, outlook looks robust with Domestic Traffic targeted to surpass pre-pandemic levels by Q4 CY 2023. Similarly, International Traffic recovery will be aided by countries such as South Korea, Japan and Singapore adapting to the ‘new normal with minimal restrictions. Further, China is moving away from the ‘Zero-Covid policy, easing significant border restrictions that were in place since the start of the pandemic. The management is expecting a robust recovery in CY 2023 both in international and domestic sectors aided by supply and demand side drivers.
Kualanamu Airport, Medan
As outlined earlier, GMR Airports Limited had entered into a strategic partnership with Angkasa Pura II to operate, maintain and develop Kualanamu International Airport (KNO), Medan, Indonesia for 25 years. The JV entity between GMR Airports and Angkasa Pura II took over the commercial operations on July 7, 2022.
The traffic outlook for Kualanamu Airport is promising based on recent developments. There was a robust recovery in CY2022 with traffic reaching 5.9 Mn despite negligible international traffic during the first four months due to COVID restrictions. This recovery was supported by the Indonesian governments removal of most COVID travel restrictions in April 2022. By the end of the year, the traffic had reached 72% of the CY2019 levels. As a positive development, the domestic passenger service charge (PSC) increased by 27% and the international PSC increased by 16% after the takeover. Further, more than 75% of the routes operational in 2019 were restored by the end of 2022, which will provide impetus for traffic in 2023. The airports performance was recognized when Medan Airport was shortlisted for the Routes Asia award. Furthermore, management has been able to attract new routes with Qatar Airways announcing a flight between Qatar and Medan in January 2024 and Batik Air has started selling direct flight tickets to Chennai with operations scheduled to start in August 2023. Airlines have increased frequencies on the existing routes and new airlines have also started operating on existing routes.
With the overall robust traffic performance and the introduction of new routes, the management is confident that the traffic performance in CY2023 will continue to be strong. The managements focus is on executing the companys vision to develop Kualanamu International Airport as the Western International Hub of Indonesia and emerge as a key economic growth engine for the region.
Crete International Airport
The consortium of GMR Airports and TERNA attained the concession commencement date for the design, construction, financing, operation, maintenance of the new international airport of Heraklion at Crete in Greece on February 6, 2020. The concession period is 35 years including the design and construction phase.
The passenger traffic at existing Crete airport reached 8.1mn for CY 2022, which is 2% higher than 2019 (pre-covid data), demonstrating a strong recovery in leisure traffic.
During the year, Concreting works at terminal building and apron area have started. Base laying and compaction for runway and taxi way is progressing well. Overall construction progress is about 20%.
Environmental, Social and Governance (ESG) Focus
As the Company operates in an increasingly resource-constrained world, being environmentally conscious and efficient are key to our operations. The Company has a Corporate Environment, Health, Safety and Quality (EHSQ) Policy to articulate, guide, and adopt an integrated approach towards implementing EHSQ objectives and the Company remains committed towards the said policy. The Company has also adopted Climate Resilience Policy towards its commitment to reduce the carbon footprints and minimizing impacts with climate resilience programs.
These established systems certified by reputable certifying agencies have helped to monitor and manage our operations systematically, safely and in an environmentally friendly manner. The Company continues to abide by regulations concerning the environment by allocating substantial investments and resources on a continuous basis to adopt and implement pollution control measures. Our continuous endeavor to go beyond compliance and conserve natural resources helps to march towards attaining excellence in environmental management and efficient and sustainable operations as well. On Social front, the company not only takes care of well-being of its employees but also health & safety of its value chain partners. The company always tries to keep its employees updated by imparting cutting edge knowledge through various Learning and development initiatives. Human Rights protection is given topmost priority in the company. Inclusive growth and equitable development are embedded in the value system of the company. Ethics and Accountability forms bed rock of our Governance system. The company has an Anti-Corruption and Anti-Bribery policy and separate Code of Business Conduct & Ethics. The said policy is applicable to all employees, Board of Directors, subsidiaries, and Business Associates (suppliers, contractors, service providers and other key business partners) of the company and states zero tolerance towards any form of bribery and corruption. Data protection and leakage are viewed very seriously, and the company has a very robust system on cyber security. The details of ESG initiatives are provided in the Business Responsibility and Sustainability Report (BRSR) forming part of Annual Report.
Discussion and analysis of financial conditions and operational performance
The consolidated financial position as at March 31, 2023 and performance of the Company and its subsidiaries, joint ventures and associates during the financial year ended on that date are discussed hereunder:
1. NON-CURRENT ASSETS
1.1 Property Plant and Equipment (PPE)
PPE has increased from Rs. 9,400.91 crore as at March 31, 2022 to Rs. 14,136.49 crore as at March 31, 2023 primarily due to expension in Delhi International Airport Limited (DIAL), Hyderabad International Airport Limited (GHIAL) and COD achieved in GMR Goa International Airport Limited ("GGIAL") offset by depreciation charge for the year.
1.2 Right of use asset
Right of use asset has increased from Rs. 94.33 crore as at March 31, 2022 to Rs. 182.05 crore as at March 31, 2023 primarily due to additions of leased assets in GGIAL and GMR Airport Developers Limited ("GADL") offset by amortisation during the year.
1.3 Capital work-in-progress
Capital work-in-progress has increased from Rs. 10,162.63 crore as at March 31, 2022 to Rs. 11,172.92 crore as at March 31, 2023 primarily on account of expansion of existing airport at New Delhi, Hyderabad and Goa.
1.4 Other Intangible Assets
There is no siginificant increase in other Intangible Assets
1.5 Investments accounted for using equity method
Investments accounted for using equity method have increased from Rs. 1,773.91 crore as at March 31, 2022 to
Rs. 1,841.52 crore as at March 31, 2023 primarily due to share of profits from Joint Ventures / Associates, conversion of loan given to equity investments offset by dividend received from joint venture and partial stake sale of investment in GMCAC during the year.
1.6 Loans
Loans and advances have increased from Rs. 1,263.35 crore as at March 31, 2022 to Rs. 1,474.55 crore as at March 31, 2023 mainly due to loan given to Group companies offset with conversion of loan to equity investment.
1.7 Other financial assets
Other financial assets have increased from Rs. 1,867.75 crore as at March 31, 2022 to Rs. 2,262.45 crore as at March 31, 2023 mainly due to increase in carrying value of derivative instruments due to Mark to Market valuation offset by reclassification of security deposit to current financial assets.
1.8 Other non-current assets
Other non-current assets have decreased from Rs. 3,727.33 crore as at March 31, 2022 to Rs. 2,327.90 crore as at March 31, 2023 primarily on account of reduction in balances with Government authorities, decrease in capital advances offset by increase in lease equalization receivables.
2. CURRENT ASSETS
2.1 Financial assets – Investments
Investments have increased from Rs. 1,686.70 crore as at March 31, 2022 to Rs. 2,538.26 crore as at March 31, 2023 due to investment of surplus funds in mutual funds/ commercial papers.
2.2 Financial assets – Trade receivables
Trade receivables have decreased from Rs. 375.53 crore as at March 31, 2022 to Rs. 368.93 crore as at March 31, 2023 due to realisation of trade receivables in normal course of business.
2.3 Financial assets – Cash and cash equivalents
Cash and cash equivalents have increased from Rs. 1,619.45 crore as at March 31, 2022 to Rs. 3,277.71 crore as at March 31, 2023 mainly due to fund raised from Groupe ADP through issuance of FCCB in GIL.
2.4 Financial assets – Bank balances other than cash and cash equivalents
Bank balances other than cash and cash equivalents decreased from Rs. 1,496.38 crore as at March 31, 2022 to
Rs. 742.96 crore as at March 31, 2023 primarily due to utilization of funds for project expansion in DIAL and GHIAL.
2.5 Loans
Loans and advances have increased from Rs. 252.71 crore as at March 31, 2022 to Rs. 465.52 crore as at March 31, 2023 mainly due to loan given to Group companies.
2.6 Other financial assets
Other financial assets have increased from Rs. 666.57 crore as at March 31, 2022 to Rs. 993.38 crore as at March 31, 2023 primarily due to reclassification of security deposit from non-current financial assets to current financial assets and increase in unbilled revenue.
2.7 Other current assets
Other current assets have decreased from Rs. 452.06 crore as at March 31, 2022 to Rs. 356.57 crore as at March 31, 2023 primarily due to decrease in balances with Government Authorities and other advances/ receivables in the normal course of business.
3. EQUITY
Equity share capital remains the same at Rs. 603.59 crore. Other equity has increased from (1,421.41) crore as at March 31, 2022 to (1,396.37) crore as at March 31, 2023 primarily due to recognition of equity component on financial instruments of
Rs. 479.35 crore and offset by loss for the year of Rs. 459.38 crore.
Non-controlling interest has decreased from Rs. 2,735.97 crore to Rs. 1,761.63 crore on account of share of minority interest loss in subsidaries.
4. NON-CURRENT LIABILITIES 4.1 Non-Current Borrowings
Non-current borrowings have increased from Rs. 24,404.59 crore as at March 31, 2022 to Rs. 28,176.48 crore as at March 31, 2023, primarily due to increase in borrowings in GAL, GGIAL, DIAL, GHIAL and GIL, partially offset due to repayment of Senior secured notes (USD Bonds) in GHIAL and NCBs in GAL. Further currency value of INR depreciated against USD led to increase in borrowings.
4.2 Lease Liabilities
Lease liabilities have increased from Rs. 108.10 crore as at March 31, 2022 to Rs. 190.19 crore as at March 31, 2023 due to additions of leased assets in GGIAL and GADL.
4.3 Other Financial Liabilities
Other financial liabilities have increased from Rs. 1,632.07 crore as at March 31, 2022 to Rs. 2,877.07 crore as at March 31, 2023, mainly due to exchangeable bonds issued by GAIBV as part of GMCAC transations and advance received against sale of financial assets.
4.4 Provisions
There is no siginificant in movement in the provisions.
4.5 Deferred tax liabilities (net)
Deferred tax liability (DTL) increased form Rs. 22.88 crore as at March 31, 2022 to Rs. 190.43 crore as at March 31, 2023 due to DTL recognized on equity component of FCCB in GIL.
4.6 Other non-current Liabilities
Other non-current liabilities have increased from Rs. 2544.78 crore as at March 31, 2022 to Rs. 2,583.80 crore as at March 31, 2023 primarily due to advance received from customer in the normal course of business.
5. CURRENT LIABILITIES 5.1 Current Borrowings
Borrowings have increased from Rs. 2,111.17 crore as at March 31, 2022 to Rs. 3,767.00 crore as at March 31, 2023 primarily due to reclassification of borrowings from non-current to current based on the repayment schedule offset by repayment of short term loan from financial institution and other short term borrowings.
5.2 Trade Payables
Trade payables have increased from Rs. 543.38 crore as at March 31, 2022 to Rs. 850.78 crore as at March 31, 2023 in the normal course of business.
5.3 Other current financial liabilities
Other current financial liabilities have increased from
Rs. 2,930.73 crore as at March 31, 2022 to Rs. 3,535.30 crore as at March 31, 2023. The increase is mainly due to capital creditors (included in non-trade payables) for capital work in process and accrued interest on borrowings.
5.4 Provisions
Provisions have increased from Rs. 236.29 crore as at March 31, 2022 to Rs. 237.71 crore as at March 31, 2023 in the normal course of business.
5.5 Other current liabilities
Other current liabilities have increased from Rs. 562.69 crore as at March 31, 2022 to Rs. 644.26 crore as at March 31, 2023 mainly due to increase in statutory dues payable.
Overview of our results of operations
The following table sets forth information with respect to our revenues, expenditures and profits/(loss) on a consolidated basis:
(Rs in crore)
Particulars |
March 31, 2023 | March 31, 2022 |
Continuing operations |
||
Income |
||
| Revenue from operations (including other operating income) | 6,693.40 | 4,600.72 |
| Other income | 595.59 | 358.44 |
Total income |
7,288.99 | 4,959.16 |
Expenses |
||
| Revenue share paid / payable to concessionaire grantors | 1,914.72 | 224.02 |
| Operating and other administrative expenditure | 3,054.89 | 2,274.13 |
| Depreciation and amortisation expenses | 1,042.44 | 889.40 |
| Finance costs | 2,343.11 | 2,018.66 |
Total expenses |
8,355.16 | 5,406.21 |
Loss before share of profit of investments accounted for using equity method, exceptional items and tax from continuing operations |
(1,066.17) | (447.05) |
| Share of profit of investments accounted for using equity method | 85.97 | 70.70 |
Loss before exceptional items and tax from continuing operations |
(980.20) | (376.35) |
| Exceptional items | 254.34 | (388.26) |
Loss before tax from continuing operations |
(725.86) | (764.61) |
| Tax expense/(income) | 114.07 | (12.30) |
Loss after tax from continuing operations (i) |
(839.93) | (752.31) |
EBITDA from continuing operations (Sales/income from operations – Revenue share – operating and other admin expenses) |
1,723.79 | 2,102.57 |
Discontinued operations |
||
| Loss from discontinued operations before tax expenses | - | (318.33) |
| Tax expenses | - | 60.75 |
Loss after tax from discontinued operations (ii) |
- | (379.08) |
Total loss after tax for the year (A) (i+ii) |
(839.93) | (1,131.39) |
| Other comprehensive income for the year, net of tax (B) | (635.62) | (456.09) |
Total comprehensive income for the year, net of tax (A+B) |
(1,475.55) | (1,587.48) |
Sales/Operating Income
The segment wise break-up of the Sales/Operating Income are as follows:
Particulars |
For the year ended March 31, 2023 |
For the year ended March 31, 2022 |
||
| Amount (Rs in crore) | % of Revenue from operations | Amount (Rs in crore) | % of Revenue from operations | |
Revenue from Operations: |
||||
| Aeronautical | 1,726.95 | 25.80% | 1,017.41 | 22.11% |
| Non-aeronautical | 3,830.97 | 57.24% | 2,488.19 | 54.08% |
| Other operating income | 841.99 | 12.58% | 828.55 | 18.01% |
| Construction revenue and sale of materials | 87.28 | 1.30% | 148.07 | 3.22% |
| Income from security and other services | 206.21 | 3.08% | 118.50 | 2.58% |
Total Revenue from operations |
6,693.40 | 100.00% | 4,600.72 | 100.00% |
Operating income from aeronautical sources
Income from aeronautical sources principally consisting of landing and parking, passenger service fees and UDF.
Operating income from aeronautical services increased by 69.74% from Rs. 1,017.41 crore in FY 2021-22 to Rs. 1,726.95 crore in FY 2022-23 mainly due to increase in traffic and business.
Operating income from non-aeronautical sources
Income from non-aeronautical sources principally consists of income from rentals, trade concessionaires, ground handling and cargo handling.
Operating income from non-aeronautical services increased by 53.97% from Rs. 2,488.19 crore in FY 2021-22 to Rs. 3,830.97 crore in FY 2022-23 mainly due to increase in traffic and business.
Other operating incomes
Other operating income includes rentals received in connection with commercial development on land that is part of our airport projects, management services income and investment income.
Other operating income increased by 1.62% from Rs. 828.55 crore in FY 2021-22 to Rs. 841.99 crore in FY 2022-23 mainly due to increase in management service income and investment income.
Operating income from construction revenues and sale of materials
Income from construction revenues and sale of materials is derived from the execution of engineering, procurement and construction works in connection with projects under implementation.
Construction revenue and sale of material has decreased by 41.05% from Rs. 148.07 crore in FY 2021-22 to Rs. 87.28 crore in FY 2022-23 due to completion of certain projects in FY 2022-23.
Operating income from security and other services
Income from security and other services has increased by 74.02% from Rs. 118.50 crore in FY 2021-22 to Rs. 206.21 crore in FY 2022-23 mainly due to increase in business in security services rendered by Raxa Securities Services Limited (RSSL).
Expenditure
Revenue share paid/ payable to concessionaire grantors
The revenue share paid/payable to various concessionaires has increased from Rs. 224.02 crore in FY 2021-22 to Rs. 1,914.72 crore in FY 2022-23 primarily on account of MAF waiver in FY 2021-22 in DIAL. From April 01, 2022. DIAL started to pay MAF.
Cost of material consumed
The cost of material consumed has increased from Rs. 92.57 crore in FY 2021-22 to Rs. 96.57 crore in FY 2022-23 is mainly on account of increase in material consumption in GACAEL in FY 2022-23.
Purchase of Traded goods
The purchase of traded goods has increased from Rs. 52.37 crore in FY 2021-22 to Rs. 138.19 crore in FY 2022-23 primarily due to increase in sale of duty-free goods and other materials.
Employee benefits expenses
The employee benefit costs has increased from Rs. 755.12 crore in FY 2021-22 to Rs. 969.38 crore in FY 2022-23 mainly due to annual increment to employees and capitalisation of project in GGIAL which resulted in charge of employee benefits expenses to statement of profit and loss.
Other expenses
Other expenses include rates and taxes, utilities expenses, manpower hire charges, technical consultancy fee, cost of variation works, insurance, airport operator fee, lease rentals, repairs and maintenance to plant and machinery/ Building, travelling and conveyance, legal and other professional charges, provision for advances, losses on sale of fixed assets and investments, communication, loss on foreign exchange and other miscellaneous expenses.
There is increase in other expenses in FY 2022-23 mainly due to increase in legal and professional fees, loss on derivative instrument, airport operator charges, repairs and maintenance, travelling and conveyance and provision for bad and doubtful debts on account of increase in traffic and business opportunities.
Exceptional items
In FY 2022-23, there is a gain of Rs. 254.34 crore on account of the gain on sale of partial investment in GMCAC offset by provision for receivables in DIAL.
Tax expenses
Tax expense mainly comprises of current tax expense and deferred tax expense / (credit). There is increase in tax expense in FY 2022-23 compared to FY 2021-22 mainly due to increase in deferred tax expense in GIL and GHIAL.
Significant changes in key financial ratios, along with detailed explanations
Key Financial ratios on standalone basis including significant changes (more than 25%) are shown in note no. 40 of standalone financial statements.
Corporate Social Responsibility
GMR Varalakshmi Foundation (GMRVF) is the Corporate Social Responsibility arm of the GMR Group. The Group has been undertaking CSR activities on a significant scale since 1991. GMRVF supports the companies under the Group in implementing their CSR mandates. GMRVFs purpose is to work in the fields of Education, Health and Empowerment such that its activities directly benefit mainly the communities in the immediate neighbourhood of the Groups projects. Currently, GMRVF is working with selected communities in about 20 locations in India. The locations are spread across different states namely Andhra Pradesh, Delhi, Gujarat, Himachal Pradesh, Karnataka, Goa, Punjab, Telangana, Uttar Pradesh, and Uttarakhand.
Recognitions for GMRVF in the year FY 2022-23 are as below.
• Received "Odisha CSR Excellence Award" for best CSR practices around GMR Kamalanga Energy Ltd.
• Received "Maharashtra CSR Award" for the CSR initiatives implemented around GMR Warora Energy Ltd.
• Received District Level Award for Best Community Service in and around GMR Chennai Outer Ring Road project area.
During the year 2022-23, GMRVF implemented the CSR activities in the areas of Education, Health and Livelihoods in all its project areas including starting the operations at Aviation Skill Development Center at Goa.
Risk Concerns and Threats Identification, assessment, profiling, treatment and monitoring the risks
The Company has a continuous process of strengthening its Enterprise Risk Management practices across the group. Typically, the risk management processes cover the lifecycle of the Development Business from Bidding, Development, Construction to Operational phases of each Business. Periodically, processes are reviewed and updated or strengthened as required. The Company also takes the assistance of external experts to review and modify risk management processes as may be required. The Companys Risk Management process is being expanded to add responsibilities towards ESG (Environment, Social and Governance) aspects of the business. The Risk Management Committee of GIL has also been overseeing and reviewing the frameworks and risks from both ERM and ESG perspectives. The Company has also constituted the ESG Committee for exclusively focusing on the ESG related aspects and way forward.
Linkages: Strong linkage with Corporate Strategy and Risk Management functions has been designed to help the Company focus on key strategic risks. Detailed risk analysis is carried out during the formulation of the Companys Strategic Plan and Annual Operating Plan. List of top risks are reviewed as part of the Strategic Planning exercise. ERM team also shares the results of its exercise with the MAG to enable it to draw plans for risk-based audit.
Business Resilience: For organization to quickly adapt to disruptions while maintaining continuous business operations and safeguarding people, assets and overall brand equity, we have put in place, detailed Business Continuity Plans (BCP) and Disaster Recovery Plans (DRP) for key assets. These plans identify potential vulnerabilities and put in place appropriate processes and risk treatment plans to respond and minimize impact of disruptive events.
Commitments on Environment, Social and Governance (ESG)
Our Company understands that growth of our business and operations rely on two key factors: a commitment to sustainability and demonstrable efforts to reduce, eradicate or mitigate the impact of our operations on the environment and community. Our ESG program is rooted in materiality: We have conducted ESG materiality assessment which has helped us organise and prioritise relevant ESG factors based on their level of impact on the business and on key stakeholders.
Reporting: The Leadership of all businesses regularly review their risk assessment and mitigation procedures and present to their respective Boards/ Committees. Further, a consolidated perspective is presented to the Risk Management Committee of the Board. Based on the above process, the management has taken cognizance of risks in the recent times and for which appropriate plans and actions are being taken, some of the areas of risks that we had identified for monitoring through the year for materiality and impact on our businesses are as follows:
1. Macroeconomic Risk factors:
FY 2022-23 began in the backdrop of the challenges posed by the rising inflation brought on by the Russia Ukraine conflict. Globally, pricing for crude oil, natural gas, food and fertilizers rose substantially. The Indian economy was particularly impacted by the high crude oil prices. However, the government proactively mitigated this challenge by sourcing crude oil supplies from Russia at a significant discount to prevailing crude oil prices.
India was also initially impacted with an inflation shock that resulted in CPI in the range of 7% to 8%. Actions by RBI to hike interest rates from May 2022 onwards helped bring inflation under control.
During the year, Indias forex reserves fell from approx. USD 600 Bn to USD 530 Bn before springing back to USD 590 Bn later in the year. While Indian Rupee depreciated from Rs. 76 to Rs. 82 due to effects of Ukraine conflict, it has remained relatively stable in the 2nd half, which is indicative of satisfactory performance.
Governments continued spending in infrastructure, subsidies, and incentives provided traction to economic growth, and by the year end, economy had stabilized compared to start of FY 2022-23.
As such, among all the global economic and geo-political turmoil, India has remained a bright spot in the world economy. India ended FY2022-23 on a strong footing with a GDP growth of 7% despite headwinds from ongoing Russia-Ukraine conflict, high level of inflation and rate hike by Reserve Bank of India (RBI).
GILs Airport Businesses:
While the Indian aviation sector rebounded well from pandemic lows, the sector faced a number of head winds. Due to maintenance and engine issues, about 10% of Indias commercial airlines fleet was grounded during the year. Worst affected due to this issue were airlines like Go First and Spice Jet. The demand from passengers was high, but shortage of aircraft created a supply side constraint, and along with high aviation fuel pricing, lead to high air fares. Short term supply constraint was mitigated by higher passenger load factor.
With exception of the pandemic period related disruption, civil aviation industry in India has been one of the fastest growing industries. India is the third largest domestic aviation market in the world and is expected to overtake UK to become the third largest overall (domestic + international) air passenger market in the world by FY 2023-24. Further, as per IATA, Indian aviation market is expected to overtake US and China by 2030.
Since the introduction of UDAN regional air connectivity scheme in 2017, there has been a significant increase in air traffic from Tier II and Tier III cities. The Government has further planned to revive 50 airports to improve regional air connectivity within India. Apart from this, there are also plans to make additional heliports, advanced landing grounds and water aerodromes. Ministry of Civil Aviation anticipates growing number of airports in India from current 148 to ~230-240 by the year 2030. Further, the government is also taking appropriate steps to develop large scale airports (including Delhi International Airport) as global air traffic hubs.
Given the attractive sector growth prospects, the airline players are also charting their investments in line with sector growth forecasts. Various airlines operators including TATA and Indigo have planned a massive expansion of their fleets. They are also looking to add many wide body planes to enhance reach and contribute towards developing Indian airports as global air traffic hubs.
As such, aviation business in India is poised to grow in the foreseeable future and our Company is best positioned to utilize its experience and expertise in the sector.
2. Financing & Liquidity risk at GIL
GIL being a holding company with limited cash flows, has been constrained to raise debt at high interest cost. GIL has raised about Rs. 2,931.77 crores as FCCB from Groupe ADP at a cost of 6.76%, and used the funds to address the corporate debt relating to GIL and its subsidiaries/fellow subsidiaries in order to address the contingent liabilities and strengthen its Balance Sheet. Post-merger of GAL with GIL, the Company would be in a better position to raise capital to meet its requirements.
Further, as part of its strategy the Company is focused on adding airport adjacency businesses at GAL in order to improve cashflows at the airport holding company level, and improve its rating and ability to service debt, as well as finance growth capital requirements.
At asset SPV level, we continue to focus on liquidity management / cash conservation through Capex and Opex optimization. The Group has a rich history and strong track record in its abilities to raise capital.
• Interest Rate Risk:
A fallout of Ukraine conflict has been higher inflation, and most Central banks have changed stance to tighten liquidity. US Federal Reserve, BoE, Indias RBI etc. have hiked interest rates to curb inflation, which has also impacted the cost of borrowing. We believe that we are reaching the peak of this interest rate cycle and rates should largely start moving lower.
To mitigate these developments, we are continuously exploring and implementing innovative means of financing/refinancing our existing loan with the aim of reducing our interest costs. The bonds in DIAL and GHIAL have been hedged from forex perspective and have fixed debt service requirements. Our company has initiatives to increase operating cash flows and further reduce corporate debt at the holding company level to sustainable levels.
• Credit Risk:
Our airport business continues to be exposed to credit risks of airline customers and non-aero services customers. Collection of receivables from distressed airlines has continued to be a risk. The company has implemented various processes to mitigate the same, including Bank Guarantees, Cash & Carry, etc., wherever necessary. All receivables are being closely monitored and reviewed frequently by the top management. Air India privatization under a strong brand like TATA has mitigated receivable risk to a great extent and has also helped the Company recover long standing dues from Air India. The Company is cognizant of the risk posed by smaller airlines under stress and actively monitors and tracks all such risks.
• Foreign Currency Exchange Rate Risk:
Throughout the year, some of our businesses remained exposed to the vagaries of exchange rate risk, as we have some expenditure in foreign currencies for procurement of project equipment. We have a natural hedge to a certain extent as part of our revenues are pegged to foreign currency movements. Further, we would be typically hedging our foreign currency exposure to address anticipated depreciation in the Indian Rupee.
3. Cyber Security Risk
Although GILs businesses have not been affected by cyber-attacks, an increasing geopolitical hacktivism activity targeting Indian Airports has been noted. Companys cyber defenses have successfully thwarted such attacks so far.
As mitigation, GIL has a group-wide centralized cyber security program, covering people, process and technologies aspects of Cyber Protect, Detect, Respond & Recover capabilities. There is mechanism for 24 x 7 Next Generation Security Operations Centre monitoring all critical infrastructure for any suspicious activity. AI/ML-based End Point Detection is implemented across all computing devices. Periodic Vulnerability assessments and Penetration testing is conducted of the environment.
4. Geopolitical risk:
Geopolitical risks have continued to be on the risk landscape.
• Russian invasion of Ukraine has continued to disrupt economic recovery and has made significant impact on business environment across the world.
• Ongoing friction between China and US over financial and economic dominance and regional influence has created uncertainties.
• Chinas BRI has created debt burden for smaller countries, which may create strategic imbalances.
• For addressing these risks, the company relies on the governments proactive role in protecting the interests of Indian industries arising out of changing geopolitical landscape.
• As in previous case of Maldives Airport, our Company relies on high credibility of international arbitration platforms.
• Due to China based frictions, many companies are following a China + 1 policy, thus creating opportunities for India to supplement China in many sectors. The Government of India has introduced tax and fiscal incentives through the Production Linked Incentive (PLI) scheme which should attract greater manufacturing capacity to India.
• Debt burden on smaller countries has created opportunity for Indian companies to position themselves in such countries for various investments including infrastructure projects.
• Favorable geo-political developments in Middle East are also positive for India, thus creating opportunities for us.
5. Political risks:
Given the nature of the concession business, change in governments may occasionally have consequences on concessions, typically at an early stage. Accordingly, local politics within the countries, including India, where we operate may affect our business.
To address these risks, Our Group implements its strategy of working closely with all relevant stakeholders to mitigate impact of the political risks.
For our assets and projects in foreign countries, we actively partner with reputed local players and utilize their capabilities for mitigating risks that we face in their respective countries.
6. Technology Risk:
There is tremendous environmental pressure impacting aviation industry, prompting the industry to adapt to green fuels and invest in additional infrastructure required for adaptation.
• Green fuels like hydrogen fuel, SAF, etc. may bring about changes in regulations affecting the business.
• Technologies like vertical take-off and landing ("VTOL") and alternate modes of transportation like Hyperloop may impact air traffic volumes.
• Late adoption of latest technologies (AI, IOT) in airport operations may negatively impact efficiency at our airports.
• Use of digital technologies such as AI, Blockchain, etc. are allowing even traditional companies an opportunity to provide a new range of products and services.
• These technologies impact the competitive position of many players in the airports sector.
• Our company sees technology disruptions as an area of opportunity and is exploring strategies to exploit the same. We are working closely with ADP on examining the feasibility of SAF (sustainable aviation fuel) and will track the developments on Hydrogen front.
• VTOL can work for only smaller plane loads over short distances and are likely to be complementary to the existing airports, rather than competing with them. Wider adaption in India may take time.
• Our airports have been at the forefront in adoption of new technologies w.r.t. airport operations, with Digiyatra roll-out being the latest demonstration of the same.
• We are also fostering a culture of innovation through our Centre of Excellence (Innovex) and incubation cells for various aviation related technologies/ applications and in meeting both the regulatory requirements as well as operational efficiencies.
7. Competition risk:
The attractiveness of airports business is primarily driven by the volume of air traffic, retail business potential and ability to monetize real estate.
We now face competition in many of the above aspects of our business:
• Entry of new players in the business.
Aggressive bidding by existing players will continue and may impact growth prospects of the company. However, our overall competencies and rich experience in the Airports sector and our strategic partnership with Groupe ADP has strengthened our overall competitive position in the sector, both in India and overseas. We are also diversifying throughout geographies and are well positioned to compete.
• Operating in two-airports system
Alternative airports that may come up or operate in the vicinity of our airports can have impact on our business. In particular, we are likely to see the Noida Airport emerge as a second airport in the National Capital Region (NCR). We are focused on understanding the challenges and preparing our strategy to be strongly positioned to tap into opportunities and meet any challenges in this regard. Our experience as a second operator in Goa is also proving to be useful in preparing our strategy. We do believe we are strongly positioned to remain a strong leader in the NCR given the inherent advantages of Delhi International Airport and the core strengths of the Group.
• Competition from other modes of transport
Good road and rail connectivity from Delhi to cities like Lucknow, Chandigarh, Jaipur etc. may impact short haul traffic.
• Competition in retail
Increasing competition in retail business from online retail services can impact our retail business.
• Competition in airport adjacencies and services business As we explore new avenues for growth in airport adjacencies and services business, we are facing competition from global players. We are the 2nd largest private airport developer in the world and are well placed to compete with the global players in the airport adjacencies and services business.
• Competition in Real Estate
As our airports induce growth in Real Estate in their vicinity, competition to our own Real Estate business is becoming more pronounced. Gurugram, for instance, has seen a spurt in Real Estate development which poses strong competition for Aerocity. Our strategy for Aerocity is to enhance the infrastructure and services that give our Real Estate business unique advantage over the competition.
8. Regulatory – Arbitration/ Litigation Risk:
• Our airport business remains exposed to regulatory changes that may impact tariffs. While AERAs tariff determinations are trued up over the tariff period and have less impact on the long-term sustainability, they do have short term impact on profitability and liquidity. Over the years, however, tariff setting mechanism in India has moved towards maturity and presents less ambiguity for the airports. This maturity is reflected in the recent interim tariff approval for our Goa Airport at Mopa within the expected timeframe. We continue to engage with relevant stakeholders across the board, and wherever required we escalate issues through the available mechanisms of TDSAT and Courts. We continue to track all developments in the regulatory environment and assess impact of possible outcomes. We also participate in aviation industry associations and chambers of commerce to work for resolution of issues that may impact our businesses. Wherever necessary, the Group has engaged in arbitration and/or litigation as appropriate, in order to protect its interest in this regard. We have made material progress in addressing legacy issues relating to Delhi and Hyderabad Regulatory matters, which pre-date the formation of AERA.
• The company has ongoing disputes in its businesses, which primarily relate to the interpretation of issues relating to various concession documentation or laws by respective Authorities or Grantors. In one case, validity of award of Concession that was won through competitive bidding is being settled through litigation. Resolution of this case in our favor would add another new airport to our portfolio. Our company has a robust in-house mechanism for dispute risk assessment, which provides the management with an early evaluation of the risks and costs associated with every potential arbitration / litigation, before the same is triggered. The Group would typically work with a combination of strong in-house counsel – both corporate and sectoral and specialist external counsel as per the specific requirements.
9. Talent risk:
As businesses rebound in the post-pandemic phase, there is the potential risk of new players tapping into the talent pool of established airport operators. Our Company has been cognizant of this potential risk and has been proactively addressing it with a number of initiatives targeting such critical manpower. However, given the growth impetus, covering plans for new airports/ upgrade of existing airports, there is still a continuing risk of shortage of experienced/ skilled manpower. Where required, we are creating bench strength of resources to meet our growth requirements. Further, we have strong focus on the succession planning for our critical roles in the organisation. Additionally, we are also creating talent pool through our Aviation Academy for certain segments where demand for resources is high.
10. Matters related to Environment, Social and Governance (ESG)
Sustainability is core to the ethos at GMR, and has always been part of our journey, with strong focus at individual asset level. However, a need was felt to mainstream and drive it more holistically with focus on all the three aspects of ESG. As we embark on our ESG journey, we have followed a multi-pronged approach:
• Carry out ESG gap assessment, benchmarking, materiality survey, risk assessment,
• Develop ESG road map with short-term, medium-term and long-term targets
• Track and improve various ESG parameters
• Create ESG awareness among our stakeholders and enhance competency among employees
• Strengthen ESG reporting framework
We have completed our ESG assessment and implementation plan and identified the following material areas of focus:
• Waste Management
We have stated our commitment on waste management, waste reduction and have put conservation measures in place in line with our Environment Policy. We are committed to single-use plastic free airport. Our airport infrastructure has adequate capacity and comprehensive process for waste management. We are committed to public disclosure of hazardous and non-hazardous waste generated, waste disposed, waste recycled and waste reused.
• Air Quality Management
While MoEFCC & CPCB have laid down guidelines for air quality management, sources of air pollution are not limited to aviation-related emissions. Ground-service vehicles, as well as vehicles approaching the airport also contribute significantly to air pollution. However, the burden of compliance with air quality standards remains with airport operators. To address the above, we have put in place effective air quality abatement and management initiatives in place. Our airports have started replacing fossil fuel vehicles plying for field operations with electric vehicles. We are also developing KPIs for increase in EV and EV related infrastructure.
• Energy Management
With aviation industry moving towards net-zero carbon emissions target by 2050, investors are focusing on energy transition plans of the company. For given target, the airline industry will need to start switching to Sustainable Aviation Fuel.
Our Delhi and Hyderabad Airports are strengthening commitments to net-zero target by 2030, and both Delhi and Hyderabad Airports have already transitioned to sourcing their entire requirements from renewable energy. Further to this, our company is already working closely with our partners in examining the feasibility of alternate fuels (SAF) in the aviation eco system.
• Workforce Health and Safety
Our company recognizes the significance and criticality of work force safety. We understand that low standards at the workplace could lead to loss of reputation in the market. We also realize that a high rate of LTIs (Lost Time Injury) will bring an organization under scrutiny. Reflecting our commitment to highest standards of work force safety, both of our airports at Delhi and Hyderabad are ISO 45001 certified. Our operation teams provide, in accordance with standards, regular training to employees on organizational health and safety aspects. Internal and external audits are carried out regularly to ensure compliance and maintaining highest standards of work force health and safety.
• Emergency Response – Preparedness and Resilience
Response to an airport emergency from any natural or man-made event that necessitates action to save lives, protect property, and public health, is essential. Emergency situations could arise as a result of aircraft defects/ malfunctions, sabotage of aviation-related equipment, bomb threats, dangerous goods incidents, natural disasters, and so on. The company has a robust emergency response mechanism covered under Disaster Recovery Plan (DRP) and its Business Continuity Plan (BCP) ensures that core business processes regain their original state in shortest possible time without prolonged disruption.
Developments in Human Resources (HR) and Organization Development at GMR Group
HR is one of the key strategic partners and has contributed to the organization development in alignment to the strategic initiatives of the Airport business.
Following are the initiatives taken up by Airport HR in the FY 2022-23.
Talent and Succession Planning: -
Talent Management and succession planning have been the key focus areas for HR to meet the talent requirement emerging from business direction. Succession Planning process at Airport sector identifies successors for all its critical positions. In some cases, the successors are elevated from the key roles in the upcoming business unit. This reinforces the GMR Philosophy of promoting and developing its employees. The talent pipeline is further strengthened with induction of Graduate Engineer Trainees ("GETs") and Management Trainees ("MTs") based on the GET Program – Aarohan and MT Program –Aarambh.
We also hired subject matter experts from overseas locations to infuse certain specific knowledge in the Airport business.
Learning and Development Initiatives: -
Learning has been conducted under four umbrellas:
1. Daksh: These focus on developing foundational work skills
2. Nipun: Focusing on functional skills/ technical skills development
3. Saksham: Focusing on Managerial Skills Development
4. Netritva : Focusing on Leadership development
Over and above these initiatives Multi-Tier Leadership Development has been taken place via Programs like: Transition Programs, to aid transitions to higher levels in case of Internal Job Postings. Program like LEAP (at DIAL), CATAPULT (at GHIAL), introduction of Project Management learning course (Airports Sector Construction) and several knowledge sharing forums aim to develop next level of leaders to further strengthen the talent pipeline and the availability of skill set at par with the industry. Participants are prepared to take on higher cross-functional responsibilities and drive a high-performance culture in the organization. GMR Airports continued to build talent pipeline through their flagship cadre based program ‘Aarambh, a structured initiative for Management Trainees & Graduate Engineer Trainees. To enhance airport technical skills, employees have also undergone AAAE (American Association of Airport Executives) Certified Member (C.M.) Program, this program provided exposure to areas in Airport Operations, Maintenance, Finance and Management. The technical programs at Airport sector are based on the technical competency dictionary. Technical Competency Dictionary is created for all verticals of Airports and is revised once in two to three years. The document aides at developing competencies and also in recruitments.
In order to enrich diversity and dialogue, "Harmony" is implemented across levels.
GMR Airports also drives initiatives of Inner Excellence (Spirituality) to keep the workforce motivated and effective at work and personal lives.
Partnership with GMRAA:
GMR Aviation Academy ("GMRAA") is a premier academy that imparts holistic training in the field of aviation. GMR Airports collaborates with GMRAA to implement its technical programs in areas of aviation. The academy conducts training programmes accredited by Airport Council International (ACI), International Air Transport Association (IATA), International Civil Aviation Organisation (ICAO), Directorate General of Civil Aviation (DGCA), and Bureau of Civil Aviation Security (BCAS).
The academy is the only one of its kind in India to have been conferred with the ‘Regional Training Centre of Excellence stature of ICAO and the ‘Global Training Hub by the ACI. It is also an Authorized Training Centre and Accredited Training School of IATA.
Strategic Partnership with ADP
Airport Sector is also in process of collaborating with ADP for development related initiatives.
• Involve senior leadership of ADP to participate in the leadership session of Airport Sectors GET Program Implement
• Mentoring process for GET/MT program at Sector level basis the mentoring process of ADP - GP Program.
• Exchange Program - To begin with training session in Paris for 12 identified staff members Closely working with ADP Team to ensure seamless experience by supporting in: (i) Policy benchmarking (ii) Support during expatriation and on-boarding (iii) Acculturation within GMR Ecosystem and familiarization with GMR Values & Belief Working with ADP Team to create a framework to facilitate exchange of talent and training partnership between two companies which will enable two companies to leverage the capabilities of their talent.
Employee Engagement
Employee engagement is a key focus area for the Group. Annual engagement survey is conducted across all the major business units to gauge the employee experience. Frequent Town Halls, CEOs Communication, skip level meetings are also conducted to ensure continued communication with the management during the year. As part of employee recognition, Airports have institutionalised employee recognition system. As part of the employee recognition, employee of the year, star employee of the month and CEO interaction with the winners is implemented.
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www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Risk Disclosure on Derivatives
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- Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
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