After talks with Changi Airport failed to sell 26 per cent in its airport business, GVK Power and Infrastructure Ltd is in discussions with a few private equity players in an effort to dilute stake in GVK Airport Holdings.
According to sources in the know, discussions are on with a few infrastructure-focused PE majors such as Macquarie SBI Infrastructure Fund (MSIF), Morgan Stanley Infrastructure Partners and JPMorgan Asian Infrastructure Fund. Kotak Mahindra Bank and Macquarie are jointly advising GVK on the sale process.
It is learnt that GVK has plans to raise about $600-650 million (Rs 3,300-3,500 crore) through the sale. GVK Airport Holdings operates the Mumbai and Bangalore airports. This is the second time that it is looking for a buyer for the airports business. Earlier, Changi Airports International, a wholly owned subsidiary of the Changi Airports Group, backed out of investing Rs 2,200 crore for a 26 per cent stake in GVK’s airport subsidiary, citing regulatory uncertainties.
“We do not comment on speculation. We will share whenever there is any development,” said a GVK spokesperson in response to an emailed query.
Investment in the airport business is not new for Macquarie SBI Infrastructure. Last year, it had invested about Rs 890 crore ($200 million) in GMR Airports Holding, which runs the Delhi and Hyderabad airports. When contacted, a Macquarie Group spokesperson said, “We don’t comment on market speculation.”
Gautam Bhandari, managing director, India, Morgan Stanley Infrastructure Partners, did not respond to calls and text messages. An email sent to a Morgan Stanley spokesperson did not elicit any response. A JPMorgan spokesperson said “no comments” on the matter.
GVK had been progressively buying stakes from former partners in Bangalore International Airport Ltd (BIAL) and Mumbai International Airport Ltd (MIAL). It had acquired the stakes of Siemens, Larsen & Toubro and Bid Services of Mauritius. GVK is now the largest shareholder in both these airport projects.
It had taken a debt of Rs 613 crore for the BIAL stake increase and Rs 1,150 crore for MIAL. The projected total debt of GVK Power and Infrastructure is around Rs 13,884 crore, according to an ICICI Direct research report.
“Currently, the foreign players are confused with the government stand and, hence, are delaying their decision,” Deepak Purswani and Bhupendra Tiwary of ICICI Direct said in a report.
Reducing debt is a major concern for GVK, as high interest rates have been eating into the company’s earnings. “The interest expense jumped over 200 per cent year-on-year, mainly due to an increase in debt to increase stakes in the Mumbai and Bangalore airports, and higher interest rates,” said Vibhor Singhal of MG Global, commenting on the company’s results.
Cost escalation for the the international airport in Mumbai has become a cause for worry. The airport has seen a cost overrun of Rs 2,700 crore to Rs 12,500 crore.