GVK Power & Infrastructure Ltd (GVKPIL), the Hyderabad-based infrastructure major which owns the Mumbai International Airport, has made a small but significant entry into the Bangalore International Airport Ltd (BIAL) by acquiring a 12% stake from Flughafen Zuerich AG for a sum of Rs 485.6 crore ($103 million).
The deal is structured through GVKPIL’s wholly-owned subsidiary GVK Airport Developers Pvt Ltd and is subject to necessary approvals.
GVK Group chief financial officer Issac George likens the deal to “putting our foot in the door.” Talking to VCCircle, he said: “We are not a financial investor. We are a strategic investor. If the numbers make sense, we will look at ramping up our shareholding in the company. As a shareholder, we will have a right of first refusal whenever our partners want to sell shares.” Standard Chartered Bank advised GVKPIL on the transaction. GVK Group is funding this transaction with money available internally.
The deal values BIAL in excess of Rs 4,000 crore. Flughafen Zuerich held 17% stake in BIAL and, after this deal goes through, it will hold 5% stake. The operator of the Zurich airport in Switzerland announced plans to divest a 12% stake in BIAL last month for about 100 million Swiss francs before taxes or Rs 455 crore. It would continue to operate and maintain the airport, it had said at that time.
The BIAL consortium is led by Siemens Project Ventures with 40% and engineering major L&T holding 17%. Airports Authority and Karnataka Government’s KSIIDC are minority partners with 13% each. The shares of GVKPIL fell by over 5% to Rs 45.35 during the day's trade before recovering to Rs 47.5 later.
India’s airport sector has been buzzing with activity with some of the busiest airports now in the hands of private players. In fact, this sector has catapulted two south India grown business houses into the big league: GVK and rival GMR. While GMR is developing airports in Delhi, Hyderabad and Istanbul, GVK feels that there is good synergy between Mumbai and Bangalore, which is touted to emerge as the country’s third busiest airport.
With passenger traffic of 9 million passengers per annum, it is already nearing its installed capacity, necessitating fresh investments into the Bangalore airport. “Though Bangalore is much smaller compared to Mumbai, it attracts high-end international traffic. We believe it could be the third largest airport in India,” Mr George said.
In another significant development, GVKPIL has also forged a strategic alliance with Unique Airports Worldwide AG (Zurich Airport) to jointly develop new aiport projects in the Indian sub-continent. “We will both scout for projects in the region. We are joining hands with the best airport in the world. That is a big value driver for us,” he added.