Logistics Industry News
In a positive sign for GMR Airports, leading investment bank Jefferies has initiated coverage on the stock with a “buy” rating and a target price of Rs 100 per share. This translates to a potential upside of over 15 per cent from the current market price of Rs 86.92.
Jefferies’ bullish outlook stems from their belief that GMR Airports is transforming from a pure infrastructure player into a major retail destination. They see the company benefiting from several key factors:
Strong air traffic growth: The Indian aviation sector is poised for significant growth, which will directly translate into higher passenger volume at GMR-operated airports.
Lucrative travel retail opportunities: Jefferies highlights the potential for increased revenue from duty-free shops and other retail outlets as passenger spending habits evolve. They point to the rising number of international travellers, who typically spend more at airports compared to domestic passengers. Currently, duty-free spending per passenger at GMR airports sits at USD 8 – USD 12, but Jefferies believes this could climb towards the global average of USD 25 – USD 35.
Upward revision of aero tariffs: Jefferies anticipates an increase in airport user charges (aero tariffs), further boosting GMR’s revenue stream.
Unlocking real estate value: GMR’s ownership of land around its airports presents an opportunity for profitable real estate development.
“We value GMRI at Rs100 (valuing Airport Subs at 27x FY30 Ebitda, discounted at 12 per cent for 4 years). We expect PAT positive in FY26 and leverage ratios to moderate (Net D/Ebitda to 4-5x FY26 vs 10-12x FY23/FY24e), as large capex related to DIAL/GHIAL is behind,” the investment firm wrote in a recent note.
Beyond these factors, Jefferies also sees positive developments in GMR’s overall business structure:
Simpler corporate structure: Ongoing efforts to streamline GMR’s corporate structure are expected to improve operational efficiency.
Improved financial health: Jefferies expects GMR’s leverage ratios (debt to equity) to improve, indicating a stronger financial position.
Strategic partnership with ADP: The collaboration with global airport giant ADP is seen as a major boost, providing GMR with expertise in retail strategy, fundraising capabilities, and project execution. Additionally, ADP’s presence on GMR’s board is expected to enhance bidding competitiveness.
“GMR is the largest private airport operator in India and operates two of the busiest airports (Delhi/Hyderabad) and has a cumulative 27 per cent share in pax traffic in India. The attractiveness of airports business is primarily driven by the monopolistic business model, strong air traffic growth outlook in India, lucrative travel retail business potential and ability to monetize real estate,” Jefferies added.
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