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Fairfax to up stake in Bangalore Airport for $200 mn, GVK to exit

02 June, 2017

GVK Power & Infrastructure Ltd said on Friday it has decided to sell its remaining 10% stake in Bangalore International Airport Ltd (BIAL) to India-born Canadian billionaire Prem Watsa-led Fairfax group for Rs 1,290 crore ($200 million).

The transaction will be completed after receiving necessary approvals including from lenders, GVK said in a stock-exchange filing.

GVK had last year sold a 33% stake in BIAL to Fairfax India Holdings Ltd for Rs 2,149 crore to reduce debt. At the time, Fairfax India had also acquired a 5% stake in BIAL from Flughafen Zürich AG, the operator of the Zurich airport.

Fairfax India, the local unit of Fairfax Financial Holdings Ltd, said in March that it had completed the transaction for the 38% stake in BIAL for $385.5 million (Rs 2,520 crore).

BIAL operates the Kempegowda International Airport in Bangalore. The Airports Authority of India, the Karnataka government and German’s Siemens Project Venture are BIAL’s other shareholders.

The investment in BIAL marks Fairfax’s biggest deal in India. Fairfax’s first bet in India was an investment in general insurance firm ICICI Lombard in 2001, after the Indian insurance industry opened up to private players.

Eleven years later, Fairfax struck its second deal by acquiring travel services group Thomas Cook.

The Canadian company pressed the pedal and acquired a bunch of companies including business services provider Quess Corp, which in turn has taken over several companies.

Separately, Fairfax itself has made large investments in more than a half-dozen companies in various sectors. It launched an India-dedicated vehicle, Fairfax India, in November 2014. In January 2015, Fairfax India floated a public offering in Canada to raise $1.06 billion. In January this year, the firm mobilised another $500 million to invest more in India.

Overall, Fairfax has made equity investments of about $1.24 billion since August 2015, when it put in money in National Collateral Management Services Ltd, its annual report shows. It also has significant minority stakes in financial services group IIFL Holdings Ltd and Sanmar Chemicals Group.

The GVK group, which also operates the Mumbai airport as well as power plants, coal mines and highways, had said in 2014 that it was exploring a stake sale in its airport business to pare its debt.

GVK had first bought a 12% stake in BIAL in November 2009 for Rs 485.6 crore and bought another 17% for Rs 686 crore a month later. It purchased 14% more in 2011 for Rs 613.82 crore. In total, it spent about Rs 1,785 crore to acquire the 43% stake.

Its 33% stake sale in BIAL was the debt-laden company’s first asset divestment. The deal helped reduce GVK Power’s debt by Rs 2,000 crore and save Rs 300 crore in interest payments every year, the Hyderabad-based company had said at the time.

Its consolidated debt crossed Rs 27,400 crore by March 2016, according to its annual report, and has likely risen further over the past year.

GVK Power’s shares jumped from a near 52-week low on the BSE on Friday. The stock closed the day at Rs 5.94 apiece, up 14.5% from its previous close. The stock has touched a high of Rs 7.70 and low of Rs 4.13 in the past 52 weeks.

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Fairfax to up stake in Bangalore Airport for $200 mn, GVK to exit

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