W16306

GMR AIRPORT CONCESSION: MUMBAI VERSUS DELHI

Abhilash Nair and Rajesh Srinivas Upadhyayula wrote this case solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.

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Copyright © 2016, Richard Ivey School of Business Foundation Version: 2016-05-25

In 2004, bids were invited from airport developers and operators for the development and operation of
Mumbai’s Chattrapati Shivaji International Airport (CSIA) and Delhi’s Indira Gandhi International
Airport (IGIA). On January 31, 2006, after a detailed appraisal of the development and management
capabilities of the bidders, an empowered group of ministers selected the GMR-Fraport consortium as the
only technically qualified bidder for the two airports. The consortium was a partnership between GMR
Group (GMR) and Fraport AG Frankfurt Airport Services Worldwide (Fraport). However, in order to
avoid a monopoly in Indian airport operations, the empowered group of ministers determined that the
same group could not be awarded a contract for both airports, which accounted for more than 50 per cent
of the passenger and cargo traffic. Therefore, the GMR-Fraport consortium was asked to choose between
the two airports and match the financial bid of another bidder that was not technically qualified for the
work. G.M. Rao, the visionary entrepreneur behind GMR, now needed to make a crucial decision. IGIA,
the pride of the national capital region, would serve as a gateway for participants, dignitaries, and other
guests arriving for the upcoming Commonwealth Games to be held in New Delhi in October 2010.
However, CSIA was the gateway to business investments in India. Rao faced a difficult choice between a
mission-critical airport in the National Capital Region, or an airport in India’s commercial capital. Which
airport would give GMR an edge in the global aviation sector? Which choice was in line with GMR’s
vision? Rao had to make a quick and informed decision.

GMR GROUP

Rao, a first-generation entrepreneur, started his business career by trading legumes in 1978. Over the next
two decades, he formed GMR and entered many other industries, including jute mills and sugar factories.
After the liberalization of the Indian economy, GMR ventured into banking (ING Vysya Bank) and
information technology services (Quintant Services). Driven by its ability to raise capital and liaise with
various state bodies, GMR decided to exit those two markets and focus on core infrastructure as a key
driver of growth. Accordingly, GMR made significant investments in the energy and power sector during
the late 1990s.1 Between 2000 and 2005, GMR expanded its presence in energy and entered the urban
infrastructure sector, including highways and airports.
Page 2 9B16N014

INDIAN AVIATION SECTOR AND AIRPORTS

From 2002 to 2005, the Indian economy witnessed significant growth, primarily driven by various sectors
such as information technology, information technology enabled services, biotechnology, and
manufacturing. The country’s economic growth was reflected in its six largest cities (Mumbai, Delhi,
Chennai, Kolkata, Bangalore, and Hyderabad), each with a population of more than 4 million.

During the same period, the Indian airline industry was also witnessing a significant transformation. In
2004, the Indian airline industry generated revenues of US$2.8 billion.2 Between 2000 and 2004, the
industry witnessed a compound annual growth rate (CAGR) of 11.3 per cent.3 The total number of
passengers travelling by airlines within India reached 59.2 million in 2004, with a CAGR of 8.4 per cent
(see Exhibit 1). The Indian airline industry was forecasted to reach 116.8 million passengers and to
generate revenues of $5.2 billion by 2009 (see Exhibit 2). 4

However, this growth was far lower in comparison to other emerging economies, where growth was
driven primarily by the entry of private airline operators.5 Despite a surge in passenger volumes, there
was still huge potential to attract tourists, considering that India’s share in worldwide tourist arrivals was
less than 0.5 per cent in 2003. The average growth in air trips per capita in India was only 1 per cent in
2001, whereas in Brazil and China, growth was 10 per cent and 6 per cent, respectively. India’s low share
was primarily attributed to the lack of competitive, high-quality infrastructure.6 An urgent need for
competitive airline operators, supported by world-class airport infrastructure, was identified.

To improve the quality of airport infrastructure, the Indian government initiated the privatization of its
airports. The process started with the commissioning of a greenfield airport in Cochin in 1999, followed
by the privatization of airports in Hyderabad and Bangalore. The greenfield airport at Cochin was
privately built, owned, and operated, whereas the airports in Hyderabad and Bangalore were sanctioned
by the Airports Authority of India (AAI) and the Government of India.7 Although smaller airports were
also being privatized, about 50 per cent of Indian aviation passenger traffic was concentrated at IGIA and
CSIA. However, the operating capacities at these two airports were highly inadequate, which led to traffic
congestion and delays in passenger clearances.8 Although a need to modernize the two airports had been
identified as early as 1996, it was not until September 2003 that the AAI approved a proposal to
modernize the airports through a public-private partnership between the AAI and a private investor
consortium. This led to the formation of a joint venture company (JVC) between the two airports (see
Exhibit 3).

STRATEGY OF GMR AIRPORTS

In 2003, GMR realized that the growth in Indian aviation was low in comparison to other markets due to
its outdated airport infrastructure. The commercial revenue infrastructure of most airports in India was
also underdeveloped. Even in bigger airports such as IGIA and CSIA, the revenue realized from
commercial infrastructure was 27 per cent and 32 per cent of total revenue, respectively. In comparison,
revenue from commercial infrastructure in private airports across the world was estimated at around 50
per cent of total revenues. GMR’s foray into infrastructure, along with the government’s decision to
deregulate the operation and management of airports, led to the entry of the group into building and
operating airports. In 2003, GMR won its bidding on a contract for a greenfield airport, Hyderabad
International Airport. In partnership with Malaysia Airports Holdings Berhad (Malaysia Airports), the
contract was based on a build-own-operate-transfer model, which meant that the two partners had the
right to finance, design, construct, and operate the facility. The airport was expected to have an initial
capacity of 12 million passengers, with a potential to accommodate up to 40 million passengers.
Page 3 9B16N014

GMR expected that the privatization of all major airports across the country would soon follow (see
Exhibit 4). With the impetus to privatize a number of airports across the world, GMR felt that being
present in one major Indian airport was necessary for the group’s positioning as a possible entrant into the
market of globally renowned airport operators.9 Accordingly, the group decided to bid for both CSIA and
IGIA. Although GMR already had a partnership with Malaysia Airports, it decided to approach Fraport as
a partner for the much higher stakes of CSIA and IGIA bidding. The Indian government announced that
according to its Operation, Management and Development Agreement, a special-purpose vehicle, through
a joint venture of the AAI and a private player, would be formed for both airports.

MUMBAI AIRPORT

CSIA was considered the hub of air travel in India. It was located north of Mumbai, the capital of
Maharashtra, on the west coast facing the Arabian Sea. Mumbai was the commercial and financial capital
of India. It was also home to India’s oldest stock exchange, the Bombay Stock Exchange.

The airport was spread over an area of 7.6 square kilometres and was connected to the city by road and
local rail. CSIA handled 28 per cent of all passenger movements across Indian airports and 31 per cent of
all cargo.10 It was well connected to all metropolitan cities and many other domestic locations in India.
CSIA was also linked to international destinations such as London, Dubai, Singapore, Hong Kong,
Sydney, Frankfurt, and New York. In 2003, CSIA handled 34 per cent of international passengers visiting
India (equivalent to 5.04 million people) and 24 per cent of all domestic passengers (equivalent to 8.26
million people).

In financial year (FY) 2002/03, around 50 per cent of the airport’s revenue was accrued from aeronautical
sources and 32 per cent was from non-aeronautical sources; the rest was from cargo. However, at CSIA,
cargo operations were also run by Air India. As a result, cargo revenue was shared equally between Air
India and the AAI.11 It was expected that the cargo revenue at CSIA would continue to be shared with Air
India.

In 2003, CSIA had two intersecting runways that could handle 25 air traffic movements (ATMs) per hour
and a maximum of 30 ATMs per hour. An internal analysis by GMR indicated that certain operational
enhancements might increase the ATMs to 50 per hour. GMR also expected the runway to be working at
full capacity by 2016. Further, the internal analysis indicated that there was no scope for an additional
runway at CSIA. Of the 7.6-square-kilometre area that belonged to the airport, approximately 0.8 square
kilometres of the land were either under dispute or were being encroached on. The latter part mainly
housed slum dwellings in Mumbai. Only 0.22 square kilometres were available as vacant land.

CSIA had two international terminals (one dedicated entirely to Air India) and two domestic terminals
(one dedicated to Indian Airlines and the other to private carriers).12 The international terminals
(including one under renovation) were expected to be saturated by FY2013/14. However, at the current
traffic forecasts, the domestic terminals were expected to be saturated by FY2010/11. Additionally, the
space availability for parking aircraft overnight was a constraint at CSIA, so the government had already
proposed another airport in Navi Mumbai.13 This airport was proposed to be one of the largest greenfield
airport projects in India, with an area of 9.87 square kilometres accommodating two parallel runways.
However, the owners of CSIA had the right of first refusal if their financial bid was within 10 per cent of
the highest financial bid for the Navi Mumbai greenfield airport contract. The idea was that the new
greenfield airports at Bangalore and Hyderabad might attract some of the excess Mumbai traffic, thanks
to their proximity to Mumbai, to ease congestion at CSIA.
Page 4 9B16N014

To overcome constraints, it was proposed to have an investment of ₹5.9 billion14 in the first 20 years of
operation.15 Of this amount, ₹2.6 billion were mandated to be invested in the first five years. However,
GMR’s internal assessment showed that the total capital expenditure over the first 20 years would be
₹11.68 billion. In CSIA, this expenditure was expected to fund terminal expansion projects or new
terminal projects. Considering both the capital expenditure requirement as well as competition expected
from greenfield airports in Navi Mumbai, Bangalore, and Hyderabad, GMR’s bid proposed a revenue
share of 33.03 per cent with the AAI.

DELHI AIRPORT

IGIA was spread across 20 square kilometres in South Delhi. In 2003, it was the second-busiest airport in
India in terms of passenger volume and revenue. New Delhi, being the national political capital as well as
one of the important commercial capitals, attracted air traffic from both international and domestic
destinations. It received delegations from various countries, including heads of states and other
dignitaries. IGIA was the only major airport in North India. Owing to its proximity to the tourist corridor
of Agra, Jaipur, and Delhi (known as the Golden Triangle) it drew numerous tourist passengers. The
airport was located in the southern part of New Delhi, approximately 15 kilometres from the city centre.
IGIA moved 21 per cent of all passengers and 28 per cent of all cargo at Indian airports in 2003.16 It
handled 26 per cent of international passengers and 18 per cent of domestic passengers at all Indian
airports. In FY2002/03, IGIA handled 9.1 million passengers, consisting of 5.3 million domestic
passengers and 3.8 million international passengers. IGIA connected Delhi with major and minor cities in
India, as well as international destinations such as London, Dubai, Singapore, Hong Kong, Amsterdam,
Frankfurt, and New York. IGIA had two runways and a separate terminal complex for domestic and
international operations. In 2003, the runway handled a maximum of 23 ATMs per hour; its maximum
capacity was 40 ATMs per hour.17

Although the international terminal had an annual capacity of 4.6 million passengers, excluding transit
passengers, the domestic terminal had an annual capacity of 8.5 million passengers. IGIA had vacant land
of 11.02 square kilometres, of which encroached-on or disputed land made up 0.36 square kilometres. To
overcome the constraints regarding terminal capacity and runways, investment was proposed for a third
runway, a new terminal, and renovation of existing terminals. For this purpose, an investment of ₹7.9
billion was planned for the first 20 years.18 Of these funds, ₹2.8 billion were mandated to be invested in
the first five years. However, GMR’s internal estimates showed that an investment of ₹12.7 billion was
needed for the first 20 years of operations.

After construction of the new terminal, the total capacity would be 62.5 million passengers per year.
Despite an optimistic study done for GMR by a private consulting firm, few analysts believed that the
current terminals could accommodate passenger growth until about 2025. Since there was space available
in IGIA to build further airside facilities, there was a possibility of building another new terminal.
Subsequently, the consultants to GMR modified their projections and provided a new passenger traffic
forecast for the years 2027 to 2037 (see Exhibit 5). Additionally, the consultants stipulated that not more
than 50 per cent of the cargo revenue would be accrued to the JVC.19 In this revised scenario, the
consultants further conservatively estimated that the cash flows would grow at 5 per cent per year over
the next 30 years.

It was also common knowledge that India’s Uttar Pradesh government was planning a Taj International
Airport in Greater Noida.20 A senior leader of the ruling party had indicated that the government was
pushing for clearance for a new international airport.21 Going by civil aviation rules, GMR was not
Page 5 9B16N014

expecting another airport in the vicinity. Accordingly, GMR decided to bid with a revenue share of 43.64
per cent of its total revenues with the AAI.

DECISION

On November 24, 2005, the initial bid evaluation committee shortlisted two bidders, GMR-Fraport and
Reliance-ASA, based on a qualifying score of 80 per cent in both management capability and
development capability. A majority of the members of the Inter-Ministerial Group rejected the
recommendations of the evaluation committee. This led to the creation of another committee, the Group
of Eminent Technical Experts (GETE), headed by E. Sreedharan, the managing director of Delhi Metro
Rail Corporation, to evaluate the technical capabilities of the bidders. GETE recommended the
consortium led by GMR as the only bidder that technically qualified for construction of IGIA and CSIA.
In the interest of fair competition, it was decided that the same consortium could not be awarded both
airports. Therefore, GMR now had a choice of investing in either of the airports. However, the
government asked GMR to match the financial bid made by the highest bidder for the airport of its
choice. The highest bidder for IGIA was Reliance-ASA, with a 45.99 per cent revenue share, and for
CSIA it was GVK-ACSA, with a 38.7 per cent revenue share.

While preparing the bid, bidders had access to SH&E projections for passenger, cargo, mail, and air
transport movements until 2040 (see Exhibits 6 and 7). The Ministry of Civil Aviation stipulated that the
concession agreement was available to the winners of the bid for a period of 30 years, extendable to
another 30 years. As specified in the request for proposal, GMR also provided the cash flows to the
Government of India for both airports for a period of 20 years (see Exhibits 8 and 9).22 Airside (cargo and
aeronautical) revenue and fixed costs per passenger were expected to be constant between 2027 and
2037.23 It was also expected that the non-aeronautical revenue and the variable cost per passenger would
be a function of the number of passengers.24 The request for proposal specified a bid weighted average
cost of capital of 11.6 per cent for both projects.

The consultants appointed to advise GMR indicated that CSIA was a better choice in terms of passenger
traffic, cargo, ATMs, and mail, in comparison to IGIA. The internal analysts of GMR also indicated that
revenue share to AAI was significantly lower for CSIA, in comparison to IGIA. However, trusted
advisors to Rao indicated that he should consider IGIA as the airport of choice because of the embedded
flexibility to expand the scale of operations, as well as the expected support from the government due to
the mission-critical nature of the project. 25 Rao wondered, “Should I heed the advice of my consultants or
trusted advisors? Which of these options would possibly enable GMR to take a step into the big leagues
of airport operators?” He had to make a quick decision.
Page 6 9B16N014

EXHIBIT 1: MARKET VALUE AND VOLUME OF THE INDIAN AIRLINE INDUSTRY

Value Value (₹ Per Cent Passengers Per Cent

Year ($ Billion) Billion) Growth (Million) Growth
2000 1.8 81.8 – 42.9 –
2001 2.0 89.7 9.7 46.9 8.9
2002 2.0 92.6 3.4 44.1 –6.3
2003 2.3 105.6 13.8 48.7 10.5
2004 2.8 125.5 18.9 59.2 21.6
CAGR 2000–2004 11.3 8.4

Source: Market Overview Report, Datamonitor, November 21, 2005, accessed July 4, 2014,
http://site.securities.com/php/search/doc?pc=IN&dcid=91902024&pcid[]=DATAMONITORINDU&range=all&keyword=India+
Airlines&controller=search&action=search&module=default&first_load_rpp=10.

EXHIBIT 2: MARKET VALUE AND VOLUME FORECASTS OF THE INDIAN AIRLINE INDUSTRY

Value Value (₹ Per Cent Passengers Per Cent

Year ($ Billion) Billion) Growth (Million) Growth
2004 2.8 125.5 18.9 59.2 21.6
2005 3.2 145.9 16.2 70.2 18.6
2006 3.7 167.3 14.7 82.0 16.9
2007 4.2 189.3 13.1 93.8 14.4
2008 4.7 211.3 11.6 105.3 12.2
2009 5.2 233.7 10.6 116.8 10.9
CAGR 2004–2009 13.2 14.5

Source: Market Overview Report, Datamonitor, November 21, 2005, accessed July 4, 2014,
http://site.securities.com/php/search/doc?pc=IN&dcid=91902024&pcid[]=DATAMONITORINDU&range=all&keyword=India+
Airlines&controller=search&action=search&module=default&first_load_rpp=10.
Page 7 9B16N014

EXHIBIT 3: NOTE ON THE PRIVATIZATION OF IGIA AND CSIA

An empowered group of ministers was set up to oversee the entire bidding process. On February 17,
2004, an invitation seeking an expression of interest from private sector participants to acquire a 74 per
cent stake in the joint venture companies (JVCs) of the airports was issued. The last date for submitting
the expression of interest was June 2004, with an aim to complete the bidding process by September
2004.26 However, an early election resulted in a change of government—the government changed from a
National Democratic Alliance regime to a United Progressive Alliance regime. The date for submission
was extended to July 20, 2004. Only nine out of ten bidders met the initial criteria. Representatives of the
planning commission opined that the existing laws did not permit airport land to be used for purposes
unrelated to airports. Accordingly, an amendment to the Airports Authority of India Act, 1994 was
necessary in order to lease the land to the JVCs.27 This uncertainty led to the withdrawal of two real
estate developers (DLF and Hiranandani). Subsequently, two other bidders opted out, citing stiff
conditions and timelines. Owing to the comments made by the representatives of the planning
commission, the AAI Act, 1994 was amended, which empowered the AAI to lease out its airport premises
in public interest or in the interests of better management.

The airport assets were classified into aeronautical activity and commercial activity related to passenger
traffic (Type 1 asset); cargo, ground handling or other support services (Type 2 assets); and non-transfer
assets. Revenues from Type 1 assets were classified largely as aeronautical revenues, whereas
revenues from Type 2 commercial services were classified as non-aeronautical revenues. The
aeronautical revenues were fixed by the regulator, Airport Economic Regulatory Authority, as aeronautical
charges (landing and parking charges, common use self-service charges/common use terminal
equipment charges, and user development fees) to be collected from airlines and the passengers by the
airport operator. The JVCs were required to transfer Type 1 and Type 2 assets to the AAI at the end of
the concession period. There was an option provided to AAI to either purchase non-transferrable assets
at the fair market value at the time of transfer or lease the non-transferrable assets and underlying land to
the JVC. However, there was a restriction that land used for the development of non-transferrable assets
should not be greater than 5 per cent of the total demised land parcel in Delhi and 10 per cent in
Mumbai.28

The Ministry of Civil Aviation recommended a shared approach to be followed for the airports, wherein 30
per cent of the revenues from Type 2 assets were proposed to be used to cover aeronautical expenses.
On the basis of this decision, the revised Operation, Management and Development Agreement was sent
to the six pre-qualified bidders on August 30, 2005, and the deadline for submitting the bid was
September 14, 2005.29 Accordingly, five bids were received for IGIA and six for CSIA.30
Source: Created by the authors.
Page 8 9B16N014

EXHIBIT 4: PRIVATIZATION OF MAJOR AND MINOR AIRPORTS IN INDIA

Note: The map is not to scale; the size of the dots indicates minor or major size of airports.
Source: GMR internal documents.

EXHIBIT 5: PASSENGER FORECAST 2027–2037 (IN MILLIONS)

Year Low Base High

2027 60 62 90.0
2028 60 64 90.0
2029 60 66 90.0
2030 65 68 97.5
2031 65 70 97.5
2032 65 72 97.5
2033 70 74 105.0
2034 70 76 105.0
2035 70 77 105.0
2036 70 80 105.0
2037 70 83 105.0

Note: Numbers have been scaled to protect confidentiality.

Source: GMR internal estimates.
Page 9 9B16N014

EXHIBIT 6: PASSENGER TRAFFIC FORECASTS, INCLUDING TRANSIT (IN MILLIONS)

Year IGIA CSIA CSIA (Constrained)*

Low Base High Low Base High Low Base High
2004 11 12 12 14 15 15 14 15 15
2005 12 13 13 16 16 16 16 16 16
2006 13 14 15 17 18 18 17 18 18
2007 14 15 16 17 18 19 17 18 19
2008 14 16 17 18 19 20 18 19 20
2009 15 17 18 19 20 22 19 20 22
2010 16 18 19 20 22 23 20 22 23
2011 17 19 21 21 23 25 21 23 25
2012 18 20 23 23 25 27 23 25 27
2013 19 22 25 24 27 29 24 27 29
2014 20 24 27 26 29 32 26 28 31
2015 21 25 29 27 31 35 27 30 34
2016 23 27 32 29 33 38 29 32 37
2017 24 29 35 31 35 41 31 34 39
2018 25 31 37 32 38 44 32 36 42
2019 27 33 40 34 40 48 33 38 45
2020 28 35 43 36 43 51 35 40 46
2021 29 37 46 38 45 55 36 42 47
2022 31 39 49 39 48 58 38 44 48
2023 32 42 52 41 51 62 39 46 49
2024 34 44 56 43 53 66 40 48 50
2025 35 46 59 45 56 70 42 50 50
2026 36 48 63 47 59 74 43 50 50
2027 38 51 66 49 62 79 44 50 50
2028 39 53 70 51 65 83 45 50 50
2029 41 56 73 52 68 87 47 50 50
2030 42 58 77 54 70 91 48 50 50
2031 44 60 81 56 73 96 49 50 50
2032 45 63 85 58 76 101 50 51 51
2033 47 66 89 60 80 106 50 51 51
2034 49 68 93 62 83 111 50 51 51
2035 50 71 98 65 87 116 51 51 51
2036 52 74 103 67 90 122 51 51 51
2037 54 77 108 69 94 128 51 51 51
2038 56 81 113 72 98 134 51 51 51
2039 58 84 119 74 102 141 51 51 51
2040 60 87 124 77 106 148 51 51 51

Note: *Some estimates show that the airport would be running at full capacity by 2025. CSIA would not have space to
construct another airstrip by 2025. Accordingly, there would not be any growth in traffic beyond 2025.
Source: GMR internal documents.
Page 10 9B16N014

EXHIBIT 7: CARGO TRAFFIC FORECASTS (IN THOUSAND TONNES)

Year IGIA CSIA

Low Base High Low Base High
2003 293 293 293 323 323 323
2004 316 319 323 340 343 346
2005 341 349 357 359 365 371
2006 363 376 389 376 386 395
2007 386 405 425 394 408 422
2008 411 437 464 414 433 452
2009 438 471 506 436 461 486
2010 467 509 554 461 492 525
2011 497 549 606 488 527 569
2012 530 592 663 518 566 618
2013 564 639 725 550 609 673
2014 601 690 794 585 656 735
2015 640 745 869 622 707 803
2016 680 803 950 661 761 877
2017 722 864 1,037 701 818 954
2018 765 929 1,130 743 878 1,038
2019 810 996 1,229 785 940 1,126
2020 855 1,066 1,332 828 1,004 1,219
2021 903 1,140 1,445 874 1,073 1,319
2022 954 1,220 1,566 923 1,147 1,427
2023 1,007 1,304 1,696 973 1,224 1,542
2024 1,062 1,393 1,835 1,026 1,306 1,666
2025 1,119 1,486 1,983 1,081 1,392 1,797
2026 1,180 1,585 2,141 1,138 1,483 1,937
2027 1,242 1,689 2,309 1,198 1,577 2,084
2028 1,307 1,798 2,487 1,260 1,678 2,242
2029 1,374 1,911 2,675 1,324 1,782 2,407
2030 1,445 2,031 2,875 1,390 1,891 2,582
2031 1,518 2,159 3,090 1,460 2,007 2,771
2032 1,596 2,295 3,323 1,534 2,132 2,975
2033 1,680 2,443 3,579 1,614 2,267 3,198
2034 1,769 2,601 3,855 1,698 2,411 3,439
2035 1,863 2,770 4,155 1,787 2,565 3,700
2036 1,960 2,948 4,475 1,879 2,727 3,978
2037 2,063 3,139 4,821 1,977 2,900 4,279
2038 2,169 3,339 5,190 2,077 3,081 4,600
2039 2,279 3,549 5,584 2,181 3,272 4,941
2040 2,393 3,770 6,003 2,289 3,472 5,304

Source: GMR internal documents.

Page 11 9B16N014

EXHIBIT 8(A): CASH FLOW FORECASTS FOR IGIA (IN ₹ MILLION, EXCEPT PASSENGERS AND CARGO)
FY → 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Total aeronautical
revenue 508.9 545.7 633.0 761.5 887.6 1,057.6 1,247.2 1,477.4 1,433.3 1,385.2 1,330.2 1,271.5
Cargo revenue 300.9 328.5 347.4 374.1 410.4 462.0 519.1 584.1 657.4 739.8 831.7 930.9
Total trading
concession
revenue 193.9 252.2 317.0 360.4 505.9 632.2 783.7 923.7 1,018.7 1,136.5 1,354.3 1,494.1
Total rent and
services revenue 97.2 101.1 111.1 118.5 137.2 191.7 199.3 280.9 300.2 306.3 317.2 338.7
Total other income 48.0 52.2 30.2 126.3 211.5 252.2 370.0 440.2 476.5 611.7 684.8 701.5
Total revenue 1,148 1,279 1,438 1,740 2,152 2,595 3,119 3,706 3,886 4,179 4,518 4,736
Staff costs Variable 310 355.2 405.4 412.6 439.8 468.7 499.8 532.8 568 605.9 646.1 689.3
Voluntary
retirement scheme
costs Fixed 0 0 0 0 0 0 0 0 0 0 0 0
Repairs and
maintenance Variable 46.7 57.8 63.9 67.6 106.1 95.0 97.6 97.6 97.6 97.8 171.1 173.7
Consumption of
stores and spares Variable 5.0 5.2 5.4 5.7 5.9 6.1 6.5 6.7 7 7.2 7.6 7.8
Net electricity and
water charges Variable 57.8 61.5 65.2 87.4 134.3 142.4 151.1 160.2 170 180.4 191.3 202.8
Rent rate and taxes Fixed 13.5 13.5 13.5 26.1 26.1 26.1 30.4 30.4 30.4 37.6 37.6 37.6
Insurance premium Fixed 25.9 29.1 33.5 39.6 47.8 82.2 92.6 104.3 107.8 113.7 120.7 139.1
Rehabilitation
expenses Fixed 0 0 0 0 0 0 0 0 0 0 0 0
Other operating
expenses Variable 212.0 233.5 257.6 298.5 351.1 393.5 459.1 530.9 563.9 610.4 662.2 703.5
Total operating
expenses 670.0 755 844.0 937 1,111 1,213 1,337 1,463 1,544 1,653 1,836 1,953
Depreciation and
amortization 10.9 32.4 92.6 82.2 168.9 288.9 295.4 302 302 304.1 364.6 592.8
All passenger
movements (in
million passengers) 14 15 15 16 17 19 20 21 23 25 27 29
Total cargo (in
thousand tonnes) 81.7 87.8 95.0 102.6 110.7 119.3 128.7 138.9 150 162 174.8 187.8
Capital expenditure 622.0 2,443 1,513.5 1,611.7 0.0 247.4 0.0 823.7 253.7 1,508 173.9 173.9
Note: Numbers have been scaled to protect confidentiality.
Source: GMR internal documents.
Page 12 9B16N014

EXHIBIT 8(B): CASH FLOW FORECASTS FOR IGIA (IN ₹ MILLION, EXCEPT PASSENGERS AND CARGO)

FY → 2019 2020 2021 2022 2023 2024 2025 2026

Total aeronautical revenue 1,221.1 1,395.9 1,593.0 1,821.5 2,077.6 2,355.9 2,482.6 2,611.3
Cargo revenue 1,042.0 1,162.2 1,293.7 1,439.1 1,600.2 1,778.5 1,977.0 2,192.6
Total trading concession revenue 1,650.2 1,809.3 1,978.5 2,427.4 2,646.7 2,876.5 3,157.0 3,434.3
Total rent and services revenue 345.7 353.0 377.0 400.2 409.1 436.1 445.7 455.7
Total other income 813.9 836.7 861.1 1,009.8 1,042.8 1,077.8 1,279.1 1,329.8
Total revenue 5,073.0 5,557.0 6,103.0 7,098.0 7,777.0 8,525.0 9,341.0 10,024.0
Staff costs Variable 776.3 873.9 981.3 1,099.1 1,231.1 1,375.9 1,537.6 1,718.7
Voluntary retirement scheme costs Fixed 0 0 0 0 0 0 0 0
Repairs and maintenance Variable 176.3 227.6 227.6 230.7 411.3 411.3 413.0 508.5
Consumption of stores and spares Variable 8.0 8.5 8.9 9.1 9.6 10.0 10.2 10.7
Net electricity and water charges Variable 215.2 228.3 242.2 257 272.6 289.1 306.7 325.4
Rent rate and taxes Fixed 37.6 37.6 52.8 52.8 52.8 52.8 52.8 52.8
Insurance premium Fixed 145.9 155.7 166.5 186.3 200 241.3 257.6 271.7
Rehabilitation expenses Fixed 0 0 0 0 0 0 0 0
Other operating expenses Variable 757.4 827.6 904.8 1,027.8 1,121.1 1,222.2 1,332.2 1,430.9
Total operating expenses 2,117.0 2,359.0 2,584.0 2,863.0 3,298.0 3,603.0 3,910.0 4,319.0
Depreciation and amortization 746.5 577.6 403.7 404.8 533.7 661.3 676.1 697.0
All passenger movements (in million
passengers) 30.0 32.0 34.0 36.0 39.0 41.0 43.0 45.0
Total cargo (in thousand tonnes) ‘ 202.0 216.5 231.7 247.8 265 283.3 302.8 323.0
Capital expenditure 179.8 173.9 1,996.5 343.3 576.5 82.8 53.3 0

Note: Numbers have been scaled to protect confidentiality.

Source: GMR internal documents.
Page 13 9B16N014

EXHIBIT 9(A): CASH FLOW FORECASTS FOR CSIA (IN ₹ MILLION, EXCEPT PASSENGERS AND CARGO)
FY → 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Total aeronautical
revenue 602.2 633.5 726.5 893.7 1,044.3 1,228.3 1,452.2 1,717.8 1,710.9 1,702.0 1,690.9 1,667.0
Cargo revenue 185.2 198.5 196.5 200.0 209.3 233.3 262.0 293.9 330.4 371.5 417.6 468.5
Total trading
concession revenue 239.8 306.7 395.0 477.2 640.7 755.4 900.0 1,033.3 1,272.6 1,423.5 1,571.5 1,736.3
Total rent and services
revenue 114.1 123.5 140.7 145.4 163.9 179.1 172.4 232.2 263.3 324.8 344.1 353.3
Total other income 40.2 44.1 22.4 51.1 71.1 91.7 118.3 127.0 136.5 174.8 188.3 202.4
Total revenue 1,182.0 1,306.0 1,481.0 1,767.0 2,129.0 2,488.0 2,905.0 3,404.0 3,714.0 3,997.0 4,212.0 4,427.0
Staff costs Variable 319.1 364.8 416.3 423.5 451.3 481.1 512.8 546.5 582.8 621.3 692.8 783.9
Repairs and
maintenance Variable 100.2 126.7 131.1 181.3 186.5 161.7 167.4 170.2 207.8 250.9 257.6 309.1
Consumption of stores
and spares Variable 7.0 7.2 7.6 7.8 8.0 8.5 8.9 9.1 9.6 10 10.2 10.7
Net electricity and
water charges Variable 69.3 73.5 98.0 152.8 162.2 172.0 182.4 193.5 205.2 217.8 230.9 245.0
Rent rate and taxes Fixed 23.0 23.0 23.0 23.0 32.4 33.3 34.6 34.6 39.6 39.6 39.6 39.6
Insurance premium Fixed 27.0 30.2 36.7 42.6 62.0 65.0 73.5 89.8 95.9 101.5 113.3 117.6
Other operating
expenses Variable 203.3 222.2 247.4 284.6 329.8 361.5 413.3 474.3 518.0 560.0 596.3 633.7
Total operating
expenses 749.0 848.0 960.0 1,116.0 1,232.0 1,283.0 1,393.0 1,518.0 1,659.0 1,801.0 1,941.0 2,140.0
Depreciation and
amortization 10.9 38.7 66.7 137.8 209.3 224.1 286.5 334.6 338.0 390.9 441.1 448.7
All passenger
movements (in million
passengers) 17.0 18.0 19.0 20.0 21.0 22.0 24.0 26.0 28.0 30.0 32.0 34.0
Total cargo (in
thousand tonnes) 83.7 88.7 94.1 100.2 107.0 114.3 123.0 132.4 142.6 153.5 165.2 177.8
Capital expenditure 1,096.0 1,574.0 1,469.0 1,113.0 480.0 777.0 337.0 802.0 801.0 174.0 174.0 174.0

Note: Numbers have been scaled to protect confidentiality

Source: GMR internal documents.
Page 14 9B16N014

EXHIBIT 9(B): CASH FLOW FORECASTS FOR CSIA (IN ₹ MILLION, EXCEPT PASSENGERS AND CARGO)

FY → 2019 2020 2021 2022 2023 2024 2025 2026

Total aeronautical revenue 1,647.2 1,800.0 1,970.9 2,145.7 2,340.0 2,547.2 2,620.4 2,695.7
Cargo revenue 523.7 584.3 650.9 723.0 803.9 892.8 918.7 945.4
Total trading concession revenue 1,922.4 2,109.8 2,300.9 2,533.9 2,763.3 3,019.8 3,156.3 3,271.1
Total rent and services revenue 362.6 400.4 361.1 376.7 396.5 408.9 421.7 443.9
Total other income 256.1 274.8 294.8 371.1 397.6 425.9 522.6 547.8
Total revenue 4,712.0 5,169.0 5,578.0 6,150.0 6,701.0 7,295.0 7,640.0 7,904.0
Staff costs Variable 883.9 995.9 1,116.7 1,251.7 1,402.6 1,573.9 1,679.1 1,791.5
Repairs and maintenance Variable 317.0 320.4 369.8 373.7 391.1 507.6 513.0 525.0
Consumption of stores and spares Variable 11.1 11.5 12.0 12.6 13.0 13.5 14.1 14.8
Net electricity and water charges Variable 260.0 275.7 292.4 310.2 329.1 349.1 370.4 392.8
Rent rate and taxes Fixed 39.6 40.0 40.0 40.0 40.0 40.0 40.0 40.0
Insurance premium Fixed 123.3 132.4 140.7 152.0 163.0 175.0 194.8 200.2
Other operating expenses Variable 678.5 741.7 800.4 876.5 951.7 1,033.0 1,073.9 1,106.7
Total operating expenses 2,313.0 2,518.0 2,772.0 3,017.0 3,291.0 3,692.0 3,885.0 4,071.0
Depreciation and amortization 454.8 460.4 460.4 460.4 472.0 522.6 562.4 570.0
All passenger movements (in million
passengers) 37.0 39.0 41.0 44.0 46.0 49.0 49.0 49.0
Total cargo (in thousand tonnes) 190.7 204.1 218.5 233.3 249.1 266.1 266.1 266.1
Capital expenditure 173.9 130.9 678.9 810.9 666.3 32.8 0 217.4

Note: Numbers have been scaled to protect confidentiality.

Source: GMR internal documents.
Page 15

ENDNOTES
1
“Corporate Presentation,” GMR Group, 2009, accessed October 5, 2014, www.gmrgroup.in/company_catalogs.aspx.
2
All currency amounts are in US$ unless otherwise stated.
3
“Airlines in India, Market Line Industry Profile,” Datamonitor, accessed October 5, 2014.
4
Ibid.
5
George Williams, Airline Competition: Deregulation’s Mixed Legacy (London, UK: Ashgate, 2002).
6
Traditionally, it was believed that a single producer would be preferred, thus leading to a monopoly in the market, but
during the 1990s, privatization of the airline industry forced airlines to search for ways to reduce costs. In turn, airlines also
pressured airports to reduce charges on aviation services offered. Globally, this led to the privatization of public airports.
Owing to infrastructural bottlenecks, the aviation sector, including the management of airports, witnessed significant
deregulation.
7
“Position Paper on the Airports Sector in India,” Department of Economic Affairs, Ministry of Finance, Government of India,
2009, accessed December 12, 2012, http://pppinindia.com/pdf/ppp_position_paper_airports_052k9.pdf.
8
Rekha Jain, Govind Raghuram, and Rachna Gangwar, “Airport Privatization in India: Lessons From the Bidding Process in
Delhi and Mumbai,” Indian Institute of Management Ahmedabad, 2007, accessed July 23, 2012,
www.iimahd.ernet.in/assets/snippets/workingpaperpdf/15501336412007-05-01.pdf.
9
Airports Economic Survey, Airports Council International, 2004.
10
Jain, Raghuram, and Gangwar, op. cit.
11
Ibid.
12
Indian Airlines was the state-owned airline operator focused primarily on domestic routes. In 2007, due to strategic
concerns, this airline was merged with Air India, the state-owned international operator.
13
“Sonia Lays Foundation for Rajiv Gandhi Airport; Navi, Mumbai, Pune, Ludhiana to Get International Airports,” The Hindu
Business Line, accessed June 16, 2013, www.thehindubusinessline.com/todays-paper/sonia-lays-foundation-for-rajiv-
gandhi-airport-navi-mumbai-pune-ludhiana-to-get-international-airports/article2171855.ece.
14
₹ = INR = Indian rupee; US$1 = ₹44 as of December 31, 2004.
15
For purposes of confidentiality, investment figures have been scaled.
16
Jain, Raghuram, and Gangwar, op. cit.
17
GMR internal estimates.
18
For purposes of confidentiality, investment figures have been scaled.
19
In order to generate competition, the Operation, Management and Development Agreement, under clause 8.5.7 (ii) (c),
stated that within six months of operation at least two unrelated (non-group) entities (of which one may be the JVC) were
responsible for the provision of cargo-handling services at the airport. Hence, it was assumed that only 50 per cent of the
cargo revenues actually accrued to the JVC in each of the airports. Ministry of Civil Aviation, “Operation, Management and
Development Agreement between Airports Authority of India and Delhi International Airport Private Limited for Delhi Airport,”
April 4, 2006, accessed on May 6, 2016, www.civilaviation.gov.in/sites/default/files/moca_000971.pdf; Ministry of Civil
Aviation, “Operation, Management and Development Agreement between Airports Authority of India and Mumbai
International Airport Private Limited for Mumbai Airport,” April 4, 2006, accessed on May 6, 2016,
www.civilaviation.gov.in/sites/default/files/moca_000979.pdf.
20
“New Initiatives,” Greater Nodia, accessed June 16, 2013, www.greaternoida.com/initiatives.
21
“Wipro Wants More Land in Noida,” Rediff, January 4, 2005, accessed June 16, 2013,
http://inhome.rediff.com/money/2005/jan/04wipro.htm.
22
Cash flow statements have been scaled for confidentiality purposes. Since there was heavy capital expenditure planned
by GMR until 2026, it was assumed that the JVC would incur maintenance capital expenditure equivalent to depreciation.
23
Aero revenues and fixed costs from 2027 to 2037 could be approximated as an average of the most recent 10 years (i.e.,
2017 to 2026).
24
Depreciation from 2027 to 2037 was estimated to be 10 per cent of the written book value of assets at the beginning of the
year.
25
If passenger traffic increased beyond 62.5 million, IGIA had the flexibility to build another terminal. The cost of such a
terminal was estimated to be ₹3 billion. It generally took about three years to complete a terminal of this capacity.
26
P. Kuhad, “Bidding Process for the Delhi and Mumbai Airports,” Planning Commission, Government of India, 2010,
accessed May 19, 2016,
http://planningcommission.gov.in/sectors/ppp_report/4.Case%20Studies/1.Bidding%20Process%20delhi%20mumbai%20Air
port.pdf.
27
Ibid.
28
Ministry of Civil Aviation, Delhi, op. cit; Ministry of Civil Aviation, Mumbai, op. cit.
29
P. Kahud, op. cit.
30
Five consortia bids for both the airports were as follows: (1) Essel-TAV, (2) GMR-Fraport, (3) DS Construction-Munich, (4)
Sterlite-Macquarie-ADP, and (5) Reliance-ASA. One bidder, GVK-ACSA, bid only for the CSIA.