AAI to sell stake in Hyderabad and Bengaluru airports to raise funds

01 Apr 2021 Editorial Team

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The Airports Authority of India (AAI) will sell its 13 per cent stake in GMR Hyderabad International Airport (GHIAL) and Kempegowda International Airport, Bengaluru (Bengaluru International Airport, or BIAL), to raise funds.The monetisation is planned under the government's national asset monetisation pipeline through which Budget 2021 has envisaged earning Rs.2.5 trillion. The sale will help AAI bolster its finances; the government-owned airport operator is likely to post a loss of over Rs.10 billion in financial year 2021.The authority will soon appoint a transaction advisor to conduct a valuation of its stake in the two airports in which Fairfax Group and Delhi-based GMR Infrastructure (GMR Infra) hold the largest stake. As per the shareholding agreement, the largest shareholders have the first right of refusal on the stake. Fairfax and Siemens hold 54 per cent and 20 per cent stake in BIAL, while GMR Infra holds a 63 per cent stake in GHIAL. The governments of Karnataka and Telangana each hold a 13 per cent stake in the airports.Reportedly, there are no immediate plans for AAI to offload its 26 per cent stake in Delhi International Airport (DIAL) or Mumbai International Airport (MIAL). This gives it the power to influence special resolutions, which require at least 75 per cent vote of shareholders. AAI is not a passive shareholder in DIAL and MIAL; this gives it a significant say over the capital expenditure (capex) planned, which is not the case for BIAL and GHIAL.Despite its losses, the Ministry of Finance has asked AAI to continue with its capex programme, which entails an investment of around R s80 billion for FY21 and FY22. The capex is largely to develop new airports or upgrade existing airstrips and airport terminals.AAI has raised around Rs.30 billion from external borrowings, but that may not be sufficient to undertake infra work, leading to the need to sell its residual stake in the two airports. AAI also plans to put Tiruchirappalli International Airport, Biju Patnaik Airport (Bhubaneswar), Sri Guru Ram Dass Jee International Airport (Amritsar), Swami Vivekananda Airport (Raipur), Lal Bahadur Shastri International Airport (Varanasi) and Devi Ahilya Bai Holkar Airport (Indore) on sale by the first quarter of financial year 2022.

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