AAI to Sell 13% Stake in Bangalore & Hyderabad Airports to Raise Funds
By – Ashwathy Nair
- A transaction advisor soon to be appointed for conducting a valuation of AAI’s stake.
- The first right of refusal on the stake is made sure by the largest shareholders.
- To do a valuation & guide the process, an advisor will be appointed.
Selling of the 13% stake that is being held in Kempegowda International Airport Bengaluru, which is commonly known as Bangalore International Airport or BIAL along with GMR Hyderabad International Airport (GHIAL) has been decided by the Airport Authority of India (AAI) to raise funds.
In order to conduct a valuation of AAI’s stake, the authority will soon be appointing a transaction advisor, in the two airports in which Fairfax Group was owned by Prem Watsa along with the GMR-Infrastructure (GMR Infra), which is based in Delhi holds the largest stake.
As per the shareholding agreement, the first right of refusal on the stake is made sure by the largest shareholders. Industry executives, as well as analysts tracking the two companies, said while Fairfax is a clear favourite to buy the stakes of AAI, for GMR Infra, which is having a consolidated debt of over ₹25,000 crores as well as it is selling assets itself that may be challenging to buy the stake if the price is high.
Fairfax and Siemens hold 54 as well as 20 per cent in Bangalore International Airport (BIAL), while a 63 per cent of stake is being held by GMR Infra in GHIAL. The governments of Karnataka as well as Telangana, each holds a 13 per cent of stake in the airports. A senior government official stated that “Since the authority owns a minority stake in the two companies and has not received a positive return from the two airports nor a say in the management, it has been agreed to monetize the stake. A resolution of the Board has recently been passed. The advisor would then be named. It will make a valuation and direct the operation.”
However, the official claimed that there are no immediate plans to unload 26 per cent of the shares in Delhi International Airport (DIAL) or Mumbai International Airport (MIAL) provided that AAI holds 26 per cent of the shares in both companies. This provides the power to control special resolutions, which probably require 75% of the votes of the shareholders. “AAI is not a passive shareholder for DIAL and MIAL and has a major influence over the expected CAPEX, which is not the case for BIAL and GHIAL,” said the second official.
Monetization is scheduled under the government’s national asset monetization pipeline, which is projected to generate ₹2.5 trillion in the budget. The selling of the stake would also allow AAI to strengthen its finances, which are seriously affected by the effects of the pandemic. The government-owned airport operator, which is one of the rare profit-making public sector companies in the civil aviation sector, is likely to have a loss of more than ₹1,000 crores in FY21. It will be in the red for the first time since its inception.
Despite the losses, AAI has been asked by the finance ministry to continue its Capex program, which includes an investment of about ₹8,000 crores for FY21 and FY22. Capex is primarily designed to build new airports or improve existing airstrips and airport terminals. The public sector undertaking has received about ₹3,000 crores from external borrowing.
However, this may not be sufficient to pursue infra-work, leading to the need for selling the residual stake in both airports. AAI also intends to purchase 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.
As per the analysts and merchant bankers, it stated that at the current valuation, it might be possible that the two stakes may be fetching the government over ₹3,000 crore, which is more than the amount it earned by selling the six airports.
Recently, around 11.5 per cent stake was sold by Fairfax to Canadian pension fund Ontario Municipal Employees Retirement System, which values 100 per cent stake of BIAL at $2.9 billion.
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