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GVK to invest Rs4,500 cr in Bial, also plans to buy Siemens stake

GVK to invest Rs4,500 cr in Bial, also plans to buy Siemens stake
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First Published: Tue, Mar 09 2010. 01 15 AM IST
Updated: Tue, Mar 09 2010. 11 54 AM IST
Mumbai: GVK Power and Infrastructure Ltd, which owns a 29% stake in Bangalore International Airport Ltd, or Bial, will invest Rs4,000-4,500 crore to modernize and expand the facility, according to chairman and managing director G.V. Krishna Reddy.
It also plans to buy Siemens Project Ventures GmbH’s 40% stake in Bial.
“We would want to acquire the Siemens stake. But there are some restrictions. We will take over Siemens’ stake at an appropriate time,” said Reddy, without elaborating on the mode of acquisition.
Siemens is required to stay invested for a specific period, in accordance with the terms of the ownership agreement.
GVK plans to enter into an understanding with Siemens on buying the stake at a future date at a predetermined price.
Reddy did not say how he would raise funds for acquiring the stake, but said he would have no problem in finding resources.
After acquiring a 17% stake in Bial from India’s largest engineering firm Larsen and Toubro Ltd (L&T) in December 2009 for Rs686 crore, GVK has emerged as the second largest stakeholder in the company with a 29% stake.
In November, GVK had acquired 12% of Zurich Airport’s stake in Bial for Rs484.6 crore. Both the deals priced Bial shares at Rs105 apiece.
GVK also runs Chhatrapati Shivaji International Airport in Mumbai through a special purpose vehicle, Mumbai International Airport Ltd, or Mial.
“We want to have new terminal building and new runway too. We will also bring new management to Bangalore airport for fast-tracking the modernization and expansion programme,” Reddy said. Son Sanjay Reddy, vice-chairman of GVK, may head the Bangalore airport project, he said.
GVK’s chairman spoke to Mint on the sidelines of India Aviation 2010, the second international conference on civil aviation, in Hyderabad last week.
With GVK’s increased stake in Bial, its board was reconstituted in January with the induction of three new members from the company—Krishna Reddy, Sanjay Reddy and Indira K. Reddy.
GVK is expected to take some key decisions on management and expansion plans on 9 April, when Bial’s board of directors are set to meet.
A senior airport analyst, who did not want to be identified, said GVK’s balance sheet is overstretched and its 29% Bial stake acquisition was expensive.
“GVK has acquired 29% equity in Bial for Rs11.7 billion. We have valued Bial at a 20% discount to the transaction price,” wrote analysts Girish Solanki and Bandish Mehta in a 4 February report by domestic brokerage Religare Enterprises Ltd.
In a statement issued on 19 January, Bial said it will fast-track the construction of a new terminal, T2. In its first phase, T2 will cater to 15 million passengers annually. The terminal will be further expanded in the next phase to eventually handle 36 million passengers a year, it said.
Associated airside infrastructure will also be expanded to cater to the new terminal. The design for the new terminal will be selected through a global bidding process, the company said.
The existing terminal, T1, will be expanded to take the annual capacity to 15 million passengers. It handled 8.7 million passengers in the first year.
While L&T has sold its entire stake, Zurich still holds a 5% stake after selling 12% in November. The Airports Authority of India, representing the Union government, and a local government body, the Karnataka State Industrial Investment and Development Corp. Ltd, own 13% each in the firm.
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First Published: Tue, Mar 09 2010. 01 15 AM IST