Fairfax to list Anchorage, its vehicle for airport and other infra funding

Bangalore Airport reports $66.8 million loss against in 2020 against profit of $53.8 million in 2019

Indian born Canadian billionaire Prem Watsa-owned Fairfax India is planning to list Anchorage Infrastructure, its flagship investment vehicle for airports and other infrastructure investments in India. Meanwhile, Fairfax controlled Bangalore International Airport (BIAL) to invest around $2.2 billion to create infrastructure to handle around 90 million passengers by 2034.

In a letter to the shareholders Prem Watsa, chairman, Fairfax said that since its inception in June 2019, Anchorage has actively participated in bidding for Indian airports’ and railway stations’ privatisation processes.

“It continues to look for unique and value-accretive infrastructure and allied businesses. We have also started the preparation work to list Anchorage on the Indian stock exchanges”, said Watsa.

He added, in March 2021, Fairfax India expects to close the transaction whereby it will transfer 43.6 per cent out of the 54% that it owns in BIAL to Anchorage and will sell 11.5 per cent of Anchorage for cash consideration of $130 million.

The transaction values 100 per cent of BIAL at $2.6 billion and will result in OMERS indirectly owning approximately five per cent of BIAL.

Between March 2017 and May 2018, Fairfax India invested $653 to acquire 54 per cent of BIAL.

On BAIL's expansion, he said, infrastructures are being created to handle over 90 million passengers by 2034. The total investment of about $2.2 billion required to complete the above expansions will be funded through internally generated funds and debt.

BIAL's revenues dropped by 79% in the two quarters ending in September 2020 to $23 million. The management has taken several operational efficiencies, which will result in annualised savings of $10 million.

Passenger traffic fell 60% from the previous year to about 14 million and cargo handled dropped 17% primarily because of the reduced belly capacity as described above. Based on IFRS, BIAL’s revenue dropped by 58% to $83.1 million, resulting in a loss after tax of $66.8 million versus a profit of $53.8 million in 2019.

Given the impact of the pandemic on the travel industry across the world, BIAL’s financial performance in 2020 did not come as a surprise, said Watsa.

"This is only temporary! We expect higher user fees in the third five-year control period which will start in April 2021," said Watsa who expects BIAL to generate a total ROE of 16.5 per cent for the second control period and an ROE of 17.7 per cent for the combined first and second control periods.