Andhra Pradesh: GMR Secures Rs 4,000 Crore Loan For Construction Of Bhogapuram International Airport Near Vizag

GMR has secured a loan of Rs 4,000 crore to finance the construction of a new greenfield international airport in Vizag.

Andhra Pradesh Chief Minister Y S Jagan Mohan Reddy laid the foundation for the Bhogapuram Greenfield International Airport on 3 May.

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 near Visakhapatnam.

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

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

This initiative follows a reorganisation that bifurcated the company's airports and non-airports revenue streams into two distinct listed entities two years ago.

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

The estimated cost of the project is Rs 4,592 crore.

Financing for GMR's latest airport venture is being organised by a consortium led by the India Infrastructure Finance Company (IIFCL).

The project will be executed in three phases, with the first phase designed to handle 6 million passengers annually, according to an Economic Times report.

"IIFCL has been proactive in facilitating the financing of upcoming greenfield airport projects across the country," stated PR Jaishankar, managing director of IIFCL, in response to inquiries on the matter.

"It has recently taken the lead in partially financing the Bhogapuram airport in Andhra Pradesh."

The completed project is expected to accommodate up to 40 million passengers per year.

IIFCL has granted a 14-year loan which includes repayment moratoriums during the airport's construction and for one year after the airport becomes operational.

Other financial institutions, including REC, PFC, and public sector banks, are likely to participate in the banking consortium.

GMR's division into separate airports and non-airports businesses was announced in August 2020 and received regulatory approvals in December 2021.

This move resulted in the former GMR Infrastructure being split into two distinct listed companies. The original entity was renamed GMR Airport Infrastructure and houses the airport business, while the new company formed after the split was named GMR Power and Urban Infra and encompasses power generation, roads, and SEZs.

GMR and France's Groupe ADP, which manages all three Paris airports, have formed a joint venture for the construction and operation of airports.

Bhogapuram International Greenfield Airport

The airport is located about 50 km from the coastal city of Visakhapatnam in Bhogapuram. The new airport will encompass more than 2,200 acres of area.

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 TDP (Telugu Desam Party) government facilitated the acquisition of 2,700 acres of land and entrusted it to the GMR Group for the project.

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 increase in revenue to the exchequer,” officials explained.

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.