New Delhi: State-owned Airports Authority of India (AAI) plans to object to GMR Infrastructure Ltd buying the stake owned by Germany’s Fraport AG in Delhi International Airport Pvt. Ltd (DIAL), which runs India’s largest airport.
Fraport, operator of the Frankfurt airport, has in the past said it would exit DIAL by selling its entire 10% stake in the airport at the end of its lock-in period in May. GMR owns 54% of the Delhi airport operator; AAI and Eraman Malaysia hold the rest.
GMR has indicated that it would like to buy Fraport’s stake and increase its ownership in DIAL to 64%, said a government official who declined to be named.
AAI’s objection to GMR buying Fraport’s stake stems from the fact that the Bangalore-based infrastructure company had last year declined to infuse fresh funds into the $3 billion project.
“GMR did not have money to fund the airport. Now where will the money come from? We will ask them,” the official cited above said.
AAI asked GMR-led DIAL last year to infuse fresh funds into the $3 billion facility instead of charging passengers extra fees for the airport’s modernization, after aviation minister Ajit Singh directed the airports authority to serve such a notice on the operator.
DIAL said its shareholders had expressed their inability to infuse more money.
By virtue of being the lead promoter of DIAL, GMR has the right of first refusal to buy Fraport’s equity, said a GMR official on condition of anonymity. It gives GMR the right, without imposing on it the obligation, to buy the stake before it is offered to someone else.
This official said GMR had communicated its stand to AAI and will do so again when the matter is raised by the airport operator in May.
GMR needs AAI’s nod to buy Fraport’s stake.
“You can’t allow your competitor to buy the equity... that’s why you a have a first right of refusal,” the GMR official said.
An email sent to Fraport’s spokesman remained unanswered.
The GMR-led consortium was, in January 2006, awarded the concession to operate, manage and develop the Indira Gandhi International Airport following a competitive bidding process. The 30-year concession is extendable by another 30 years.
At Mumbai airport, which went through a similar privatization exercise in 2006, GVK Airport Holdings Pvt. Ltd bought a 13.5% stake from Bid Services Division (Mauritius) Ltd for $231 million in 2011 to raise its stake in Mumbai International Airport Pvt. Ltd (MIAL) to 50.5%.
A second government official said AAI’s stand was inconsistent and it did not take any action when it could have.
“If this (GVK buying Fraport stake) is wrong then MIAL was wrong, too. And in a bigger way. MIAL brought in much less equity into the project and, therefore, burdened passengers more than Delhi. Instead of giving premium and buying out Bid Services, MIAL should have invested the equity into the airport,” this official said.
MIAL, too, rejected government requests to infuse fresh funds into the airport late last year and was granted permission to charge more money from passengers to recover the cost of airport modernization this year.