Andhra Pradesh: GMR Group Secures Rs 3,215 Crore Loan For Greenfield Bhogapuram International Airport, To Be Constructed By 2025

Bhogapuram International Airport in Vizianagaram district of Andhra Pradesh is on track for completion by 2025, with construction progressing rapidly according to Minister for Industries and Information Technology, Gudivada Amarnath.

The airport is located about 50 km from the coastal city of Visakhapatnam in Bhogapuram.

GMR Visakhapatnam International Airport Ltd (GVIAL), a 100 per cent subsidiary of GMR Airports Ltd (GAL), is the concessionaire for the development and operations of Bhogapuram Airport.

The project involves the design, finance, construction, development, operation and maintenance of the airport for 40 years, extendable by an additional 20 years.

This new airport project, in the bustling coastal city of Andhra Pradesh, which also boasts of a major port and a steel unit, is part of GMR's strategic push to expand its aviation infrastructure business.

The Vizag Airport will mark GMR's fourth major airport in India, joining the ranks of those in Delhi, Hyderabad, and Goa.

Minister Amarnath highlighted that the international airport, spanning approximately 2,300 acres and with an estimated cost of Rs 4,750 crore, is poised to stimulate economic growth in North Andhra.

He emphasised that Chief Minister Y S Jagan Mohan Reddy had instructed the GMR Group to finish construction within two-and-a-half years, as per the directive given during the foundation-laying ceremony on 3 May 2023, reports The Hindu.

During the initial phase, the airport will be designed to accommodate six million passengers per annum (MPPA), and its total capacity will subsequently increase to 18 MPPA in the following two phases.

It will serve as an alternative to the existing airport in Vizag, primarily constructed to meet the requirements of the Indian Navy.

The greenfield airport was proposed in Bhogapuram after Andhra Pradesh's bifurcation in 2014. The previous Telugu Desam Party government facilitated the acquisition of 2,700 acres of land and entrusted it to the GMR Group for the project.

Funding

A group of five lenders has approved a Rs 3,215 crore term loan for GMR Visakhapatnam International Airport, marking a significant step for the GMR Group in establishing its fourth airport in India.

The project, with an estimated cost of Rs 4,727 crore, will be financed through a combination of debt (Rs 3,215 crore), equity and equity-linked instruments (Rs 1,377 crore), and a grant from the Andhra Pradesh government (Rs 135 crore).

The 18-year loan includes a three-year construction period and a one-year moratorium, carrying a weighted average interest rate ranging from 10 per cent to 10.5 per cent. Lenders will oversee the airport development fee via an escrow account established by GMR once the airport becomes operational.

This financial development follows swiftly after GQG Partners acquired a 4.7 per cent stake in GMR Airports, the holding company, for Rs 1,672 crore. REC, traditionally focused on financing power projects, ventures into the airline sector for the first time, benefitting from its 'Maharatna' status obtained last year, allowing it to fund non-power infrastructure projects.

GMR Visakhapatnam International Airport is owned 51 per cent by GMR Airport and 49 per cent by the National Investment and Infrastructure Fund.

The agreement includes an upfront infusion of Rs 410 crore by the promoter, with the remaining equity injected over the three-year construction period, as outlined in a statement by India Ratings in November.

Significance

This airport is expected to play a pivotal role in the state's development and boost tourism in northern Andhra Pradesh.

This new airport is set to serve not only the residents of North Coastal Andhra but also those from the hinterland of Chhattisgarh and Odisha, as well as improve the cargo movement from these regions.

There is significant potential for the export of shrimp, bulk drugs, agriculture products, and cashews from this region.

The airport is expected to provide jobs for roughly 5,000 people, both directly and indirectly.

The world-class facility is expected to increase connectivity between North Andhra and various parts of the world, resulting in an impetus to the growth of industries and service sector in the region, besides an increase in revenue to the exchequer.

A beach corridor development is underway, in proximity to the proposed international airport in Bhogapuram, which will provide impetus to retail and hospitality developments in the region.