RBI gives infrastructure status to MRO operations for easier overseas borrowing

The Reserve Bank of India (RBI) has included ‘Maintenance, Repairs and Overhaul’ operations under the airport infrastructure category, in a view to facilitate external commercial borrowings (ECB) for the sector.

Indian companies prefer raising large funds from overseas as interest rates there are low, while domestic interest rates remain high. With a view to boost funding for infrastructure projects, the central bank had earlier eased ECB norms for infrastructure companies allowing such firms to raise bridge finance from overseas markets under the automatic route.

“On a review, it has been decided that, for the purpose of ECB, ‘Maintenance, Repairs and Overhaul’ (MRO) will also be treated as a part of airport infrastructure,” RBI notified on Monday.

The latest move would benefit companies like PE-backed Air Works India Engineering Pvt Ltd, which provides MRO services to aviation sector in India and aircraft paint and refinishing in the UK.

The firm is backed by three PE firms, including AIM-listed Elephant Capital which invested £2.45 million in Air Works in May 2011 and a further £0.47 million in second funding round in November 2011. Air Works pulled in a much larger round from New Enterprise Associates and GTI Capital.

Air Works is one of the leading independent providers of aviation MRO services in India. Founded in 1951, by the Menon family, the firm has also gone about striking inorganic expansion by snapping the business of an established competitor, InterGlobe General Aviation.

A couple of years ago it also acquired a strategic stake in Dubai-based Empire Aviation Group for $22 million. This transaction was financed through debt from a consortium of four private equity firms led by KKR.

(Edited by Joby Puthuparampil Johnson)

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