Wednesday, January 11, 2012

Expect Rs 900 cr loss from Delhi Airport in CY12: GMR Infra

A newspaper report said GMR Infra will be allowed to collect airport development fee from Maldives Airport. Last month, a local court had banned the company from collecting it.

Speaking to CNBC-TV18, Sidharath Kapur, CFO-Airports at GMR Group says, "New tariff hike has not yet been finalised by the regulators. The company expects requisite approvals to come in by March."

Below is the edited transcript of Kapur's interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar. Also watch the accompanying video.

Q1: If you could confirm for us what exactly is the tariff that GMR will be getting for the Delhi airport?

A: At this stage regulator has not approved the tariff; they have put a proposed tariff into consultation. We had asked for a certain tariff increase and they have put an increase of 334% on the existing aeronautical tariffs into a consultation process. This process will run through the next three-four weeks, stakeholders will be invited for discussions and after that the regulator will take a final call on what kind of increases they want to approve.

Q2: How does this compare with what you wanted?

A: We had asked for a 770% increase in tariff. I will list out 2-3 key differences between our demand and actual tariff rates. A 774% increase in tariff looks daunting but if one keeps the background in mind. For the last ten years the aeronautical charges in India were based upon what airport authority was charging and Delhi airport continued to charge at same rates when they took over the airport. These charges have not increased in the last 10 years. If you factor in an inflationary growth the charges should be twice of what the currently prices are right now.

The infrastructure and the operating cost at Delhi airport have changed dramatically. A world class infrastructure worth USD 2.8 billion and commensurate operating cost, the total area of build-up in the T3 terminal is 7 times what it was 3 years back when the infrastructure was taken over.

Keeping all these factors in mind the growth in tariffs was bound to happen. In the current scenario, the revenues are ten years old but the development costs are most recent. So there is a complete mismatch between the revenues and the costs. The tariffs which we are currently demanding have been benchmarked against global airports and suppose to be the lowest in the world. The project cost has been benchmarked by Delhi airport through independent consultants.

Q3: If tariff hike of 334% is approved then what kind of impact do you think it would have on your own revenue stream and in terms of a timeline when do you think this proposal may come through?

A: The revenue approval to come in by March and effective 1st April is what we expect the new tariffs to kick in. In terms of impact on revenues, our current revenues are about Rs 600 crore on aeronautical tariffs so a 334% increase on aeronautical tariffs if proposed will take our aeronautical tariffs to about Rs 2,400 crore plus if you take non-aeronautical tariffs we are looking at about Rs 3,000-3,500 crore as our total revenue for this year.

Q4: At 330% increase in tariffs, when will you breakeven on Delhi airport?

A: For the last two years we have been making losses. Last year, we made loss of 450 crore, this year we expect to make a loss of about 900 crore. So our total networth of Rs 2,400 crore has been wiped off by more than 50% as of today. But with this tariff proposal which has been split into two parts; 148% increase next year and another 148% increase the year after that we would continue to make losses in 2013 and we will breakeven in the year after that.

Q5: Any indication of a compensation that you guys would be given in this period for the delay in the implementation of the tariffs in the proposal?

A: The way the Operation Management and Development Agreement (OMDA) works we have filled our tariff proposals strictly in line with the OMDA and we are eligible for a tariff increase 2009 onwards. So there was a delay in receiving the approvals which are beyond our control. At the same time there were certain areas that we have gone strictly by OMDA, may be 10% which are grey areas as per the OMDA and those grey areas are ones which have become issues of differences and opinion between the regulator and us. These 3-4 areas have caused that difference of 774% versus 334% and all those areas we have backed it by independent consultants based upon independent studies and reports.


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