With the Maldives government terminating the GMR Group’s contract to operate the Male airport, the company stands to lose around 20% of revenues coming from its airport operation business. What would hit the company hard is that the revenues from Male were showing robust growth as it is the gateway to Maldives, a major tourist centre.
During the July-September quarter, GMR’s total revenues from the airport segment stood at R1,469 crore, of which around R300 crore came from the Male airport operations. This was a 35% growth over the revenues booked during the same period last fiscal. The period also saw strong operational performance with a 10% y-o-y growth in traffic. Ebitda grew y-o-y to R71 crore and net profit was up 193% at R57 crore.
Apart from losing a growing business, the fate of the company’s investment of $150 million, apart from the acquisition fee of $78 million, has become uncertain.
“There has been around 10% y-o-y growth in passenger traffic from our Male project,” GMR Airports chief financial officer Sidharth Kapur told FE.
“This year, the revenues would have been more due to the development fee. However, at this point of time, we cannot assess the financial implications because we are going to take all possible legal course of action to ensure that we get to continue with the project,” Kapur added.
Kapur said that the Maldives government's notice intending to take over the possession and control of the Ibrahim Nassir International Airport, Male, saying that the concession agreement was void “was absolutely unlawful and devoid of any locus standi”. “The agreement is valid. We are going to challenge the decision before the competent forum,” he said.
Over 50% of GMR Infrastructure's gross revenue comes from the airport operations, which increased 45% from Rs 3,021.51 crore for fiscal 2011 to Rs 4,381.29 crore for fiscal 2012. The Male operations contributed to the growth in revenues as the company took over its operations in November 2010. The airport saw a passenger traffic of 2.7 million in 2011-12, which was a growth of 14% over 2010-11.
GMR along with its consortium partner Malaysia Airports Holdings won the Male project in June 2010 for a concession period of 25 years during the tenure of former president Mohamed Nasheed, who was ousted in a coup in February 2012.
The new Maldives government has alleged that the previous government favoured the private company by allowing it to levy development fees and insurance charges of $27.
GMR has said that as per their terms of agreement it was entitled to charge the airport development charge of $27 per international passenger from January 1, 2012. However, this had been disallowed by a Maldivian civil court in December 2011. GMR had subsequently written to the government that it would adjust the shortfall due to non-collection of ADC from the annual payable concession fee. The Maldivian government agreed to it vide its letter on January 5 but retracted from the commitment after March 31 and asked it to refund the adjusted payments.
Meanwhile, Maldivian President Mohamad Waheed hoped that the decision would not affect bilateral ties with India as the Male airport development contract signed by his predecessor Mohamed Nasheed's government was “void ab initio”.