Mumbai: Australia’s Macquarie Bank, the world’s second-biggest owner of airports, is interested in investing in Indian airports but the risks needed to be carefully considered, an official said on 12 June.
Regulatory frameworks, flexibility to raise capital and exit options were all important considerations in an infrastructure sector where intense competition has pushed prices up around the world, Ambalika Banerji, an associate director at Macquarie Bank, told an aviation conference in Mumbai.
“There’s a significant pool of equity chasing a limited supply of airport assets globally, and investors are paying a huge premium for control,” she said.
“Demand for airport assets is at an all-time high, and airport trading and transaction multiples are going up very quickly.”
Speakers at the conference, organised by the Centre for Asia-Pacific Aviation, estimated the average transaction EBITDA multiple for a controlling stake in a regulated airport was 19.5 in the years 2000 to 2006, up from 15.8 before the year 2000.
The average transaction EBITDA multiple for a controlling stake in a non-regulated airport was 20.5 in 2000 to 2006, up from 11.8 beforehand.
There were about 60 active and potential buyers worldwide, holding about $50-$150 billion for airport assets, the conference was told.
And potential buyers were bidding aggressively, with even traditionally conservative investors such as pension funds jumping in, Singapore-based Banerji said.
“Bidders are willing to take on a lot of risk, especially for control, and we find that people are taking a more aggressive view of due diligence as well,” she said.
“Pension funds are going directly and bidding aggressively.”
A recent example was Birmingham Airport, which drew at least 35 parties for a 48.25 % stake up for sale. Bidders included pension funds, besides investment bankers, private equity firms and airport operators, Banerji said.
In India, the government, in partnership with domestic and international firms, is modernising ageing airports and building new ones to support the rapid growth in aviation.
Second airports have been approved in the largest cities of Mumbai and New Delhi. New airports in Bangalore and Hyderabad are scheduled to open in 2008.
Macquarie, which Banerji said was the world’s second-biggest owner of airports after BAA, which is owned by Spain’s Ferrovial, would be keen on investing in India but would weigh the risks carefully.
“Look at Mumbai and Delhi - some of the standards set down seem unreachable, and the time given to reach some standards is not realistic,” she said.
“Land acquisition and resettlement are big issues, too.”
Still, Macquarie was interested in making investments and would even consider a greenfield opportunity, she said.
“Most - if not all - our investments to date have been brownfield, and that would be more comforting, but a greenfield has its own pluses,” she said.