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GVK in talks with Siemens for Bial stake

GVK in talks with Siemens for Bial stake
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First Published: Wed, Dec 23 2009. 12 44 AM IST

Graphic: Sandeep Bhatnagar / Mint
Graphic: Sandeep Bhatnagar / Mint
Updated: Wed, Dec 23 2009. 12 44 AM IST
Mumbai: GVK Power and Infrastructure Ltd is in talks with Siemens Project Ventures GmbH on picking up some or all of the German company’s stake in Bangalore International Airport Ltd, or Bial, which runs the new Bengaluru International Airport, according to two GVK executives.
Graphic: Sandeep Bhatnagar / Mint
Siemens holds a 40% stake in Bial, but is required to stay invested for a specific period in accordance with the terms of the ownership agreement. GVK, therefore, plans to enter into an understanding with Siemens on buying the stake at a future date at a predetermined price, one of the executives said.
The Hyderabad-based infrastructure firm that also runs the Chhatrapati Shivaji International Airport in Mumbai, through Mumbai International Airport Pvt. Ltd (Mial), may appoint a new managing director for the Bangalore airport.
GVK is also planning to buy Bidvest Group Ltd’s 27% stake in the Mumbai airport to add to the 37% it holds in Mial. If the plan to buy the Siemens stake succeeds, GVK will have majority control over two of India’s top airports, and compete with GMR Infrastructure Ltd, which runs the Delhi and Hyderabad airports. GMR also runs the Istanbul Sabiha Gokcen International Airport.
After acquiring a 17% stake in Bial from India’s largest engineering firm Larsen and Toubro Ltd (L&T) earlier this month 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.
“I cannot comment on this transaction at this point. We are holding our board meeting in the third week of January and we will take a call then,” said another GVK senior executive.
Sanjay Reddy, vice-chairman of GVK, is travelling abroad and did not offer any comments for this story.
Siemens Project Ventures declined to comment on selling its stake in Bangalore airport, India’s third busiest, that claims an average check-in time of 2.5 minutes for domestic passengers and 4 minutes for international ones.
A spokesman for Mial confirmed that Bangalore airport would have a new managing director in early 2010.
Marcel Hungerbuehler, Bial’s current chief executive officer, is travelling to Zurich. Mint could not contact him for his comment. The next head of the company will be redesignated as managing director, the Mial spokesman said.
As the largest shareholder in Bial, Siemens needs to stay invested for at least three years before it can dilute up to 14% and seven years before it exits the venture.
With Bangalore airport having opened in May 2008, the first phase of selling by Siemens can take place only by May 2011. Hence, GVK’s plans to enter into an agreement to buy Siemens’ stake in phases.
Bangalore airport handled 8.7 million passengers in the first year and is valued at around $1 billion (Rs4,680 crore). L&T and Zurich Airport both earned a return of at least 10 times on their investments in five years.
Nearly three-fourths of the equity in the public-private partnership project was held by a Siemens-led private consortium. Siemens invested Rs130.68 crore in the project, while Zurich Airport and L&T invested Rs55.54 crore each.
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.
Not everyone seems to be happy with GVK’s plan for a bigger role in airport infrastructure. On Monday, the Karnataka state legislative panel suggested a five-year ban on L&T, Siemens and Zurich Airport getting any government contracts, saying the firms had traded their shares in Bial for mere profit and suggested reopening the old airport in Bangalore.
“In my opinion, there is no violation of any rules. I presume Siemens and L&T had completed their work. It makes lot of sense to hand it over to another operator with airport operations as core strength,” said Sanat Kaul, India chapter chairman for the International Foundation for Aviation and Development.
A Centre for Asia Pacific Aviation, or Capa, report released on Tuesday said domestic traffic is expected to post expansion of 15% or more in 2010-11 as the industry returns to its long-term growth trajectory. This is higher than the expected increase in capacity of just under 10%, which should assist carriers in achieving higher load factors.
“International traffic (which has remained positive even during the downturn, particularly outbound travel) is expected to grow at 10-12%,” the Capa report said.
GVK Airport Developers Pvt. Ltd, a subsidiary of GVK, is in the process of raising money via bonds to fund the acquisition of the Bial stake from Zurich Airport and L&T.
pr.sanjai@livemint.com
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First Published: Wed, Dec 23 2009. 12 44 AM IST