GMR Airports faces flat FY27 Hyderabad aero tariffs despite future commissioning upside

Investment View and Hyderabad Tariff Order

In its August 27, 2026 company update, ICICI Securities maintained a HOLD rating on GMR Airports with an unchanged target price of Rs 99. The report follows the new AERA tariff order for Hyderabad airport, which contributes 27 per cent of GMR Airports’ total airport traffic.

ICICI Securities views the order as providing clarity on aeronautical tariffs for the fourth control period, FY27 to FY31. However, it considers the flat FY27E tariff outcome disappointing relative to expectations for an increase.

Hyderabad Airport Tariff Framework

AERA approved a yield per passenger of Rs 426 for the control period, marginally below Rs 445 in the prior control period. The detailed tariff structure implies that FY27E aeronautical charges per passenger will be broadly in line with FY26. The new tariff becomes effective on September 1, 2026.

Aeronautical charges comprise landing and parking charges, user development fees and cargo handling charges. The tariff does not incorporate capex that is likely to be incurred during the control period.

The regulator has adopted an incremental-revenue framework under which cost recovery is linked strictly to the commissioning of assets rather than to capex expenditure. AERA intends to issue interim tariffs once new assets are commissioned.

ICICI Securities believes this framework can create structurally higher passenger yield if assets are commissioned on schedule. The order approves incremental yield per passenger of about Rs 65 following the commissioning of Rs 100 billion of assets.

Hyderabad Revenue and Traffic Outlook

ICICI Securities expects Hyderabad aeronautical revenue to remain broadly flat in FY27E. Although user development fees are now levied on both embarking and disembarking passengers, the report estimates that UDF revenue will remain flat in FY27E and then grow at a healthy pace over FY28E and FY29E.

Revenue growth is dependent on passenger traffic because variable tariff plan incentives are linked to traffic growth. The regulatory order estimates total passenger traffic of 218.3 million during the control period and a yield per passenger of Rs 426.4.

Financial Forecasts

The broker forecasts net revenue to rise from Rs 148.1 billion in FY26A to Rs 159.8 billion in FY27E and Rs 175.1 billion in FY28E. EBITDA is projected to increase from Rs 57.6 billion in FY26A to Rs 65.9 billion in FY27E and Rs 75.7 billion in FY28E. Reported net income is forecast to rise from Rs 1.8 billion in FY26A to Rs 7.7 billion in FY27E and Rs 21.1 billion in FY28E.

Free cash flow is forecast to remain negative at Rs 34.3 billion in FY27E and Rs 13.6 billion in FY28E, alongside capital commitments of Rs 46.8 billion and Rs 27.4 billion, respectively.

Sum-of-the-Parts Valuation

ICICI Securities uses a sum-of-the-parts valuation to derive the Rs 99 target price. It values the Delhi, Hyderabad and Goa airport businesses using DCF, airport land using recent transaction values, and Delhi non-aeronautical businesses using FY28E earnings multiples.

The report notes that the merger, FCCB conversion and potential OCRPS conversion increase outstanding equity shares from 6,035 million previously to 10,600 million after the merger and FCCB conversion, and potentially 13,200 million after OCRPS conversion.

Key Risks

Upside Risks

• Stronger duty-free sales at Delhi and Hyderabad.
• Better non-aeronautical revenue.

Downside Risks

• Muted traffic growth.
• Delayed improvement in non-aeronautical revenue.
• Greater competition for Delhi Airport from Jewar Airport in Noida.