BackGovt plan to sell airports may find few takers
Only two-three serious bidders may be able to raise debt and equity, lowering chances of fair price discovery
PremiumThe government’s move to raise capital by privatizing half a dozen airports through 50-year concessions will find few takers when the aviation industry is facing acute financial stress, industry experts said.
Investment bankers Mint spoke to expect that if the government proceeds with the privatization plan, it might find only two-three serious bidders that are able to raise the required debt and equity in a liquidity-starved market, lowering the chances of fair price discovery.
One banker said it will be difficult for buyers to do adequate due diligence during lockdown, which would particularly curtail foreign interest. “As the more profitable public airports are going under the hammer first, the government will get less than fair value on many of them," he said requesting anonymity.
On day four of her five-day economic stimulus announcements, finance minister Sitharaman said on Saturday the bid process for the six airports will start soon.
The six airports in the second round are likely to be Amritsar, Varanasi, Bhubaneswar, Indore, Raipur and Tiruchirapalli, which are owned and operated by state-run Airports Authority of India.
Airport sale prospects won’t improve till airlines can get their businesses in order, said a senior industry expert, who declined to be named. Indian airlines need a direct cash infusion to pay salaries for the lockdown period, subvention on airport charges, relaxation on fuel taxes and statutory dues and government-backed credit lines that can stave off bankruptcy till passenger traffic revives and they can rebuild their balance sheets.
“Now we can almost certainly say two or three airlines may not survive the current crisis," said a senior official with a budget carrier, who requested anonymity. “What has been announced is simply a case of rearranging the deck chairs on the Titanic, along with perhaps shortening the queueing time for the buffet, while the gaping hole from the iceberg continues to take on water," the official said, adding that the reforms announced were “business as usual" steps.
Jagannarayan Padmanabhan, director and practice leader for transport and logistics at Crisil Infrastructure Advisory, said the “privatization push for more airports is good in terms of keeping the momentum on".
“We have had some interactions with private sector people and there seems to be interest for the next six airports," he said, but added that the “timing of this and the value it will get is something we will have to watch out for. Considering that these are long-term contracts for 50 years, only serious bidders will be interested in participating".
The airline industry has been grounded since 25 March due to the lockdown. Carriers are estimated to report a 44% drop in revenue this fiscal and net debt may rise to ₹46,500 crore by 2021-22, according to rating agency Icra.
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