The Airports Authority of India (AAI) has decided to sell the 13 per cent stake it holds in Kempegowda International Airport Bengaluru (Bangalore International Airport, or BIAL) and GMR Hyderabad International Airport (GHIAL) to raise funds.
The authority will soon appoint a transaction advisor to conduct a valuation of AAI’s stake in the two airports in which Prem Watsa-owned Fairfax Group and Delhi-based GMR Infrastructure (GMR Infra) hold the largest stake.
According to the shareholding agreement, the largest shareholders have the first right of refusal on the stake. Industry executives and analysts tracking the two firms said while Fairfax is a clear favourite to buy AAI’s stake, for GMR Infra — which has a consolidated debt of over Rs 25,000 crore and is selling assets itself — it may be challenging to buy the stake if the price is high.
Fairfax and Siemens hold 54 and 20 per cent stake in BIAL, while GMR Infra holds 63 per cent stake in GHIAL. The governments of Karnataka and Telangana each hold 13 per cent stake in the airports. “Since the authority holds minority stake in the two entities and has gained neither meaningful return from the two airports nor any say over the management, it has been decided to monetise the stake. A board resolution was passed recently. Accordingly, an advisor will be appointed. It will do a valuation and guide the process,” said a senior government official.
However, the official said there are no immediate plans to offload 26 per cent stake in Delhi International Airport (DIAL) or Mumbai International Airport (MIAL), given AAI holds 26 per cent stake in the two firms. This gives it the power to influence special resolutions, which require at least 75 per cent vote of shareholders. “For DIAL and MIAL, AAI is not a passive shareholder and has significant say over the capex planned, which is not the case for BIAL and GHIAL,” said a second official.
The monetisation is planned under the government’s national asset monetisation pipeline through which the Budget has envisaged to earn Rs 2.5 trillion. The sale of stake will also help AAI shore up its finances, severely hit due to the impact of the pandemic. The government-owned airport operator — one of the rare profit-making public sector enterprises in the civil aviation sector — is likely to post a loss of over Rs 1,000 crore in FY21. The first time it will be in the red since inception.
Despite the loss, the finance ministry has asked AAI to continue with its capex programme, which entails an investment of around Rs 8,000 crore for FY21 and FY22. The capex is largely to develop new airports or upgrade existing airstrips and airport terminals. The public sector undertaking has raised around Rs 3,000 crore from external borrowings. But that may not be sufficient to undertake infra work, leading to the requirement of selling the residual stake in the two airports. AAI also plans to put on sale Sri Guru Ram Dass Jee International Airport (Amritsar), Biju Patnaik Airport, Tiruchirappalli International Airport, Swami Vivekananda Airport, Devi Ahilya Bai Holkar Airport (Indore), and Lal Bahadur Shastri International Airport (Varanasi) by Q1FY22.
Analysts and merchant bankers said that at the current valuation, the two stakes may fetch the government over Rs 3,000 crore — more than the amount it earned by selling the six airports.
Recently, Fairfax sold around 11.5 per cent stake to Canadian pension fund Ontario Municipal Employees Retirement System, valuing 100 per cent stake of BIAL at $2.9 billion. BIAL intends to list to Anchorage Infrastructure Investments Holdings — the holding company of BIAL — on the Indian stock exchanges.