BIAL plan to raise Rs 70 bn in debt from banks to fund expansion plan

BIAL's traffic level has reached 27 million passengers per annum, well beyond its present capacity of 20 million

Bengaluru International Airport Ltd (BIAL) is moving ahead with its plan to raise around Rs 70 billion in debt from banks to fund its second-phase expansion plan. Sources close to the development said while the company had received approval, in principle, from its lenders for the proposal, it is waiting for the revised tariff order on user development fee (UDF) from the Airports Economic Regulatory Authority of India (AERA). “The revised tariff order is expected to be announced next week, and after which, it will immediately start the process,” the sources said.

Though it was not immediately known which banks would participate in the fundraising activity, the airport is believed to be raising debt capital from a clutch of public sector banks. Sources also said the airport had aborted its earlier plan of raising money through issue of bonds, given the tepid interest from investors along with rising interest rates in recent times.

BIAL, the third largest airport in the country, is aggressively pursuing its second-phase expansion plan. It will set up a second runway and a new terminal. This has been done to deal with the increasing traffic, which has exceeded its current capacity. While the current terminal allows BIAL to handle 20 million passengers per annum, it has already reached a traffic level of 27 million. The firm expects the traffic levels to reach 80 million by 2030. “Given the rising traffic level, we have already started working on our expansion plans with building up the second runway. We are putting the equity capital upfront before we raise the debt,” said Bhaskar Anand Rao, chief financial officer of BIAL. 

He, however, declined to specify any timeframe for its fundraising. The airport had earlier said it would require more than Rs 100 billion to pursue its second-phase expansion plan. While the debt portion would make up 70 per cent, the rest would come from equity infused by the company. Currently, India-born Canadian investor Prem Watsa-promoted Fairfax holds 54 per cent stake in BIAL, while Siemens Project Ventures holds 20 per cent.

 The remaining stake lies with the Centre and the Karnataka government in equal proportions.

The airport had earlier said its current shareholding structure didn't give it much flexibility to raise equity capital from promoters. It had thus sought changes in the laws specifying the shareholding pattern.

Under the concession agreement with the Centre valid till 2038, BIAL has the exclusive rights to handle the development, design, financing, construction, commissioning, maintenance and management of the airport.