GVK sells BIAL stake for R2,149 cr

■ Prem Watsa’s Fairfax the buyer; GVK will use pro­ceeds to re­tire debt

The Financial Express - - FRONT PAGE - Fe Bureaus

GVK Power and In­fra­struc­ture said on Mon­day it will di­vest a 33% stake in Ban­ga­lore In­ter­na­tional Air­port (BIAL) to Cana­dian in­vestor Prem Watsa-led Fairfax In­dia Hold­ings Cor­po­ra­tion and Fairfax Fi­nan­cial Hold­ings, through its wholly owned sub­sidiaries in Mau­ri­tius, for R2,149 crore ($321 mil­lion). The trans­ac­tion val­ues BIAL at around R8,000 crore, given the debt on its the books is ap­prox­i­mately R1,500 crore.

The highly lever­aged in­fra­struc­ture player had a gross debt of R24,872 crore at the end of March 2015, data from Bloomberg showed. It will use the pro­ceeds of the sale to pare debt which it had taken to ac­quire the 43% stake in BIAL for Rs 1,800 crore. The to­tal debt in GVK’s air­ports port­fo­lio is an es­ti­mated R4,200 crore.

The GVK Group re­ported a con­sol­i­dated net loss of R279 crore for the three months to De­cem­ber 2015 com­pared with a net loss of R209 crore in the quar­ter ended De­cem­ber 2014. Its to­tal in­come dur­ing the pe­riod went up 29% year-onyear to R1,038.92 crore. The com­pany is ex­pected to post an Ebitda (ear nings be­fore in­ter­est tax de­pre­ci­a­tion) of around R1,200 crore in FY16 on es­ti­mated rev­enues of R2,600 crore. GVK’s air­ports divi­sion re­ported rev­enues of R727.20 crore in the De­cem­ber quar­ter. The GVK stock closed 6.43% higher on Mon­day at R7.12 per share on the BSE.

BIAL owns and op­er­ates the Kem­pe­gowda In­ter­na­tional Air­port Ben­galuru (KIAB) un­der a 30+30 year con­ces­sion agree­ment with the cen­tral gov­ern­ment. Be­tween April and Jan­uary FY16, the air­port han­dled a to­tal of 12.9 mil­lion do­mes­tic pas­sen­gers, up 25.4% year-on year, and 2.8 mil­lion in­ter­na­tional pas­sen­gers, up 15.3% yo-y, mak­ing it the third busiest air­port in the coun­try.

While Ter­mi­nal 1 is equipped to han­dle 20 mil­lion pas­sen­gers per an­num, the ad­di­tion of an­other ter­mi­nal will take the ca­pac­ity to 55 mil­lion pas­sen­gers an­nu­ally.

Af­ter the sale, GVK will hold 10% in BIAL. Kar­nataka State In­dus­trial and In­fra­struc­ture Devel­op­ment Cor­po­ra­tion and Air­ports Au­thor­ity of In­dia each hold a 13% stake while Siemens Project Ven­tures holds 26%. Flughafen Zurich holds the re­main­ing 5%. KIAB is the first green­field air­port in In­dia to be built via a pub­lic-pri­vate partnership and be­gan op­er­a­tions in May 2008.

Ban­ga­lore Air­port & In­fra­struc­ture De­vel­op­ers Pri­vate (BAIDPL), a sub­sidiary of GVK Power & In­fra­struc­ture, had ac­quired 17% of the out­stand­ing eq­uity shares from L&T In­fra­struc­ture Devel­op­ment Projects and 12% shares from Zurich Air­port. Fur­ther, dur­ing 2011-12, BAIDPL ac­quired 14% from Siemens to in­crease its stake to 43%. The com­pany will part­ner with Watsa in de­vel­op­ing Kem­pe­gowda In­ter­na­tional Air­port through its next stage of ex­pan­sion — build­ing Ter­mi­nal 2 and a new run­way, said GVK Reddy founder, chair­man and manag­ing di­rec­tor, GVK.

GVK Air­port De­vel­op­ers, a wholly owned sub­sidiary of GVK Power & In­fra­struc­ture, had ini­ti­ated last year a process to re­duce its debt obli­ga­tions to its lenders.

“This is an im­por­tant mile­stone in delever­ag­ing our bal- ance sheet, and all pro­ceeds from this stake sale shall be used to bring down our debt obli­ga­tions to our lenders,” Reddy said.

“This is a partnership be­tween Fairfax and GVK. We will work closely with all stake­hold­ers to man­age our stake in BIAL go­ing for­ward, and will sup­port GV San­jay Reddy to con­tinue to lead the man­age­ment team as manag­ing di­rec­tor of BIAL and GVK Reddy will con­tinue as cochair­man,” said Prem Watsa, chair­man of Fairfax In­dia and chair­man and CEO of Fairfax.

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