Hyderabad-based GVK Group with interests in airports, power, hospitality and contract research has much to worry about today. The group and its promoters are facing their biggest challenges. On June 1, six officials of the Central Bureau of Investigation visited the GVK corporate office in Hyderabad to investigate the alleged irregularities amounting to Rs 705 crore in running the Mumbai International Airport Ltd (MIAL), in which it is a majority shareholder. Sources within the group say there has been no-wrong doing and allege that the charges, based on an anonymous letter, are motivated.
While the investigation is on, the group has to deal with yet another challenge. Its biggest money spinner and profit generator - Mumbai International Airport Ltd (MIAL) - is slipping. Businesstoday.in learns from its sources that from around 950 ATMs (air traffic movement - either flight takeoffs or landings) per day in the pre-COVID time, it is down to just about 100 ATMs per day today. This has a direct impact on the finances.
Sources estimate that the revenue from the airport business is down to as much as one-tenth of what it used to earn in the pre-COVID days. During the peak in the pre-COVID days, its annual revenue was close to Rs 4,000 crore for MIAL. However, even during lockdown period the airport has to incur the same set of fixed expenses, such as expenses towards utilities (electricity for instance) and manpower costs (it apparently has not retrenched any staff). It all results to inadequate revenue to take care of debt service requirements, which apparently, it has thus far been able to manage.
Today, servicing a Rs 8,500 crore debt outstanding on its books with one-tenth the revenue as compared to the pre-COVID days, is not likely to be easy. Those within the industry say slipping revenues and inability to service the debt on books is a problem most in the airport business will face in the current environment when travel is down and unless the government comes forward with a special dispensation wherein the six month moratorium allowed by the Reserve Bank of India on payments to banks is extended till things return to normalcy for the airports, GVK, sources say, could well run the risk of seeing a standard asset turn into an NPA (non performing asset). The airports business is crucial for cash generation for the GVK group, whose other assets are stretched.. In power business, as of September last year, revenues were down and debt stood at around Rs 12,000 crore (out of a total debt of Rs 24,000 crore).