The Airports Economic Regulatory Authority (AERA) has rejected GMR Infra<http://www.moneycontrol.com/india/stockpricequote/constructioncontracting-civil/gmr-infrastructure/GI27>'s claim for 24% returns on equity (ROE) from its Delhi airport project, say sources.
GMR spokesperson said that they cannot offer any comments on the story but C.V Deepak (officer on special duty)AERA told *moneycontrol.com,* "We have already allowed a 16% return on investments to GMR. Post this, that there is no further development." However, GMR had earlier told moneycontrol.comthat they have appealed to the regulator for more hike. On May 16, the company had raised airport charges by 346% as directed by AERA after which it started charging Rs 426 per passenger on domestic routes and Rs 1120 on international routes. Higher parking and landing charges have also upset airline operators. The AERA official further says that GMR in its argument for raising charges had said that world over, ROE in airport projects is around 25%. "It even gave the example of Athens International Airport where passenger taxes make up for around 80% of the aero revenues," said the official who further said that the firm also said that its cost of borrowing is around 12% and it should be considered as operating expense while calculating tariff revision. However, the civil aviation ministry has appointed SBI caps to suggest the ideal rate of return for various airports in India, but still there is no clarity on it. Currently, Delhi and Mumbai airports follow a 'hybrid' revenue model, by which they subsidise losses from 30% contribution from their non-aero activities like retail ventures and realty development alongside the airport. Meanwhile, another official from the civil aviation ministry said that GMR is in the process of monetizing land around the airport for around Rs 2000 crore. "Realty development will help the firm not only unlock value but will also help it subsidize losses it makes in the airport vertical," he said further adding that the firms communication with AERA suggest that the former is unlikely to break-even in the airport division before FY16. GMR's losses in the airport division have more then doubled to Rs 90 crore in the April-June period, quarter-on-quarter and is not so pleased with a 346% hike in airport charges introduced recently. Also, the company recorded Rs 175 crore losses in its airports division in FY11, around Rs 438 crore in FY12 and it also had a cost over-run in the Delhi airport project of about Rs 4000 crore. [email protected] -- CA. Rajesh Desai -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
