Earnings Call Transcript Analysis Report #
Financial Performance #
Key Financial Metrics #
- Total Income (Q1 FY25): INR 25.2 billion, up 19% year-on-year (YoY).
- EBITDA (Q1 FY25): INR 10.2 billion, up 18% YoY.
- EBITDA Margin (Q1 FY25): 52%, compared to 48% in Q4 FY24.
- Loss from Continuing Operations (Q1 FY25): INR 3.4 billion.
- Consolidated Net Debt (excluding FCCBs): INR 280 billion, an increase of INR 9 billion vs Q4 FY24.
- Reason for increase: Borrowings raised at Bhogapuram Airport and payment of balance capital expenditures at Delhi, partly offset by repayment of foreign currency notes at Hyderabad.
- Delhi Airport (Q1 FY25):
- Total Income: INR 12.9 billion, up 7.5% YoY.
- EBITDA: INR 3.9 billion, up 3.8% YoY.
- Hyderabad Airport (Q1 FY25):
- Total Income: INR 5.8 billion, up 21.4% YoY.
- EBITDA: INR 3.6 billion, up 11% YoY.
- Goa Airport (Mopa) (Q1 FY25):
- Total Income: INR 946 million, up 121% YoY.
- EBITDA: Positive at INR 397 million.
Comparison with Previous Periods #
- Q1 FY25 income and EBITDA showed strong YoY growth.
- EBITDA margin improved from Q4 FY24 to Q1 FY25.
- The company reported a net loss due to increased finance and depreciation costs post-expansion.
Revised Guidance or Forecasts #
- No specific revised numerical guidance was given for overall revenue or profit, but management expects benefits from tariff revisions and operational improvements in later quarters.
- Delhi tariff order expected by the last quarter of FY25, effective from April 1, 2024.
Areas of Growth or Decline #
- Growth: Overall traffic (7% YoY), international passenger traffic, income and EBITDA across all key airports (Delhi, Hyderabad, Goa). Non-aero revenue per pax at Delhi saw a 2-3% increase. Hyderabad saw strong aero and non-aero revenue growth.
- Decline/Pressure: Overall profitability impacted by higher finance and depreciation costs. EBITDA growth at Delhi (3.8%) was slower than passenger growth (7%) and income growth (7.5%), attributed to being “under base airport charges” awaiting tariff revision. Hyderabad’s EBITDA growth (11%) was slower than its revenue growth (21.4%) due to increased OpEx from the expanded terminal.
Strategic Initiatives & Business Updates #
Major Strategic Announcements #
- Merger Completion: The merger of GMR Airports with GMR Airports Infrastructure Limited is complete, streamlining the corporate structure and moving airport assets closer to GIL shareholders. Groupe ADP shares allotted in lieu of the merger are now trading.
- Enhanced Corporate Governance: Expanded board and strong balance sheet position GAIL as “future-ready.”
- Promoter Shareholding: GMR promoters remain the single largest shareholder, retaining management control.
New Products, Services, or Markets Discussed #
- Delhi Airport Initiatives:
- Air India tie-ups for international passenger check-in at select Delhi Metro stations.
- Biometric kiosks operational for easier immigration.
- Hyderabad Airport Adjacencies:
- All retail outlets now operated by GMR Airports Infrastructure Limited.
- LOI issued for Luxury Zone at the domestic terminal.
- Car park business awarded to GAIL operationalized in August.
- GMR Hospitality opened 5 F&B outlets in Q1, with >30 more expected in Q2.
- New last-minute duty-free shopping store opened.
- Transit lounge commenced commercial operations in June 2024.
- Goa Airport Adjacencies:
- Duty-free strengthened product portfolio (watches, cosmetics, rolling tobacco).
- Car parking system operationalized in July 2024.
Significant Operational Changes #
- Delhi Terminal 1 Reopening: Terminal 1 is set to restart operations on August 16th night, with SpiceJet moving first, followed by Indigo in early September. Full capacity utilization will be progressive.
- Tariff Proposal: Delhi airport submitted tariff proposal for the fourth control period (1st April 2024 to 31st March 2029).
Ongoing or Completed Projects #
- Delhi & Hyderabad Expansion: 100% physical work completed as of July.
- Bhogapuram Airport: About 34% physical progress complete as of July. Capex spend in current FY likely INR 12-13 billion.
- Goa (Mopa) Expansion: 91.5% complete as of July.
- Crete Airport: About 37.5% progress achieved as of July.
Market & Competitive Landscape #
Insights about Industry Trends #
- Optimism in the travel sector.
- India projected to be the fastest-growing large economy (World Bank, RBI 7.2% GDP growth for FY25).
- India’s travel retail market expected to grow at a CAGR of almost 21.6% (2024-2029).
- Government focus on accelerating aviation infrastructure development.
- More Indian passengers booking nonstop flights (57% in 2023 vs 53% in 2019).
- Indian travellers’ overseas spending reached $31.7 billion in 2024, $17 billion on international travel (25% increase YoY).
- Increasing transit traffic through Indian airports.
- India is the fastest-growing long-haul market for Melbourne Airport.
Competitive Positioning Statements #
- GMR Airports is part of the Nifty Tourism India Index with a 14.8% weightage (third highest).
- Focus on establishing India as a hub.
- All GMR Airports (Delhi, Hyderabad, Goa) are among the top 100 global airports (Skytrax). Delhi ranked 36th (only Indian airport in top 50).
- Management emphasizes focusing on their current portfolio and P&L generation.
Market Challenges or Opportunities Mentioned #
- Opportunity: Growing direct connectivity demand, establishing India as a transit hub.
- Opportunity (International): Focus on asset-light opportunities in the Middle East (Kuwait Terminal 2 bid, Abha in Saudi RFQ).
- Challenge: Competition exists, including instances of projects awarded on a nomination basis to competitors.
Comments about Market Share or Positioning #
- Delhi Airport: Best Airport in India and South Asia (Skytrax, 6th consecutive year).
- Hyderabad Airport: Best Airport Staff in India and South Asia (Skytrax).
- The company is positioned to capitalize on India’s growing travel market.
Risk Factors & Challenges #
Concerns or Challenges Acknowledged by Management #
- Higher Finance Costs and Depreciation: Led to a net loss from continuing operations.
- Delhi Terminal 1 Incident: An “unfortunate incident at Terminal 1 at Delhi Airport” occurred, though swift response minimized impact. Full capacity utilization of the new T1 will be progressive due to canopy work.
- OpEx at Hyderabad: Increased OpEx due to the significantly larger expanded terminal impacting EBITDA growth despite strong revenue.
- Seasonality: Q1 is generally a weaker quarter compared to Q4 for non-aero revenue.
Regulatory Issues Mentioned #
- Delhi Tariff Order: Awaiting the new tariff order for the 4th control period. The previous TDSAT order is being appealed in the Supreme Court by stakeholders, but no stay has been granted.
- The order will be effective retrospectively from April 1, 2024.
Supply Chain or Operational Constraints #
- Operational constraints related to the Delhi T1 incident are being managed, with phased reopening and ramp-up.
Statements about Market Uncertainties #
- While the overall outlook is optimistic, the timing of full revenue potential from expanded terminals (especially non-aero at Hyderabad and Delhi T1) is expected in Q3/Q4.
Forward-Looking Statements #
Outlook and Future Projections #
- Continued optimism for the travel sector in FY25.
- India’s travel retail market expected to grow significantly (CAGR 21.6% from 2024-2029).
- Expectation of accelerated pace in building aviation infrastructure by the government.
- Non-aeronautical revenue at Hyderabad expected to see a “good jump” in Q4 after new shops are fully operational by Q3.
- Delhi T1 expected to reach full capacity utilization by Q3/Q4.
- Net debt expected to peak in the next 12-18 months and then start to fall.
Commitments or Targets Set by Management #
- ESG: Delhi and Hyderabad Airports targeting net zero by 2030.
- Hyderabad F&B: More than 30 F&B outlets expected to open in Q2.
- Delhi Tariff Order: Expecting the order by December or Q4 FY25, effective April 1, 2024.
- Free Cash Flow Generation: Delhi is targeting free cash for equity generation in next 3 to 4 years. Hyderabad is already generating robust free cash.
Planned Investments or Strategic Priorities #
- Bhogapuram Airport: INR 12-13 billion capex planned for the current financial year.
- Focus on P&L and Cash Flow: Development into a very strong platform for future opportunities.
- International Opportunities: Selective pursuit, focusing on asset-light models in the Middle East (Kuwait, Saudi Arabia).
Sentiment about Future Performance #
- Confident about long-term growth driven by traffic increases and operationalization of expanded capacities.
- Expectation that EBITDA will improve significantly once new tariffs at Delhi are implemented and expanded commercial areas at Hyderabad and Delhi T1 become fully operational.
- Merger benefits include more tax-efficient dividend movement and a stronger platform for growth.
Q&A Insights #
Most Pressing Analyst Questions #
- Impact of the merger on shareholding (specifically Groupe ADP’s stake and FCCB conversion).
- Status and timeline of the Delhi tariff order and TDSAT order.
- Reasons for slower EBITDA growth compared to revenue/passenger growth at Delhi and Hyderabad (non-aero performance, OpEx).