GVK buys 12% in Bangalore airport, wants majority stake

GVK buys 12% in Bangalore airport, wants majority stake

New Delhi / Bangalore: Mumbai-based GVK Power and Infrastructure Ltd, which holds a majority stake in the Mumbai airport, bought a 12% stake in Bangalore International Airport Ltd (Bial) for Rs484.6 crore, valuing the country’s third largest airport by passengers at about $1 billion a year after the facility began operations.

GVK said it will buy more shares as part of its plan to take control of the south Indian airport. “Our intention is to have a majority stake and management control as and when we get that opportunity," G.V. Sanjay Reddy, vice-chairman, GVK Power and Infrastructure, told Mint from Hyderabad where the group is based. “We want to bring visible changes in the (Bangalore) airport."

With assets in power, roads, mining and oil and gas, GVK had raised about Rs716 crore through qualified institutional placements during this year, said Isaac George, GVK group’s chief financial officer.

GVK Airport Developers Pvt. Ltd, a unit of GVK Power, acquired the stake from Zurich Airport, which reduced its holding in Bial to 5%, which it will need to hold for another 18 months as there is a lock-in period, according to Reddy.

Taking control of Bial could give GVK a combined market share of about 30% of India’s airline passenger traffic, second only to state-run Airports Authority of India, or AAI, and possibly giving it greater weightage when bidding for other projects.

Bial is 40% owned by Siemens Project Ventures, 17% by Larsen and Toubro Ltd (L&T), 13% by AAI and 13% by Karnataka State Industrial Investment and Development Corp. Ltd (KSIIDC), besides Zurich Airport and GVK.

The public-private partnership-based airport project handled 8.7 million passengers in the year ended May. It is the third largest by traffic handled after Mumbai and New Delhi airports. Air travel in India grew at an average annual pace of 22% in 2004-2008, from 17.7 million passengers to 40.7 million. Passenger traffic touched 42.6 million in 2007 though it shrank 5% in 2008 as economic growth slowed.

Reddy said the firm was keen on taking L&T’s 12% of the 17% stake, which was offered by the developer to existing shareholders last month. GVK may have to compete with KSIIDC, which is keen on buying the stake. “The existing shareholders have the first right to refusal. We are evaluating the option. A decision will be taken soon," said V. Madhu, principal secretary for infrastructure in Karnataka.

L&T spokesperson D. Morada said reports about any sale of its stake in Bangalore airport were “speculative". “We still hold 17% in the airport," he said.

Spread over 4,000 acres, Bangalore airport will go in for its second phase of expansion soon, which will include the development of a new terminal building, Reddy said. It was “too early" to say what kind of board representation GVK will have, he said. He also steered cleared of explaining top-level changes at the operational level at Bial. An official with an international airports company that tracks the Indian market said the partial exit of Zurich did not come as a surprise.

“Zurich have wanted to reduce their exposure in Bangalore (airport) while GVK want to increase their airport portfolio, probably to position themselves more strongly for the Navi Mumbai project," said the official, who cannot be named as he is not authorized to talk to the media. “I’m sure that they hope to buy out Zurich fully at a later stage. Don’t forget that southern India is their home territory. So they’ll feel confident to be able to influence the political scene in their favour. GVK is becoming more aggressive in trying to match GMR’s airport exposure."

GMR Infrastructure Ltd heads the consortium of companies that runs the airports in New Delhi and Hyderabad and has part control of Istanbul’s second airport.

Reddy said GVK would bid for the airport at Navi Mumbai when it comes up for bidding. Mumbai International Airport Ltd has privileged bidding rights on any second airport that’s set up within a 150km radius as per the government contract. GVK isn’t planning to sell its stake in the Mumbai airport, Reddy said. GVK said it was tying up with Zurich Airport to look for opportunities to bid for projects. “We have not taken a decision to go abroad," Reddy said. “Our focus would be on India." Analysts see opportunities for infrastructure firms in airport development.

The civil aviation ministry has envisaged an overall opportunity of $110 billion (around Rs5 trillion), of which $30 billion was for the development of new airports by 2020, said Pankaj Pandey, head of research at ICICI Securities Ltd, in a 12 October report.

Zurich Airport said in a statement that it “intends to further grow in terms of operational management contracts in India with new projects." BIAL declined to offer any comments.

GVK Power and Infrastructure’s stock fell 1.97% on the Bombay Stock Exchange to close at Rs47.25 a share on Thursday after the news broke. The benchmark equity index, the Sensex, rose 0.95%.


C.R. Sukumar in Hyderabad and Satish John in Mumbai contributed to this story.