After talks with Changi Airport
failed to sell 26 per cent in its airport business, GVK Power and
Infrastructure Ltd is in discussions with a few private equity players in an
effort to dilute stake in GVK Airport Holdings.
According to sources in the know,
discussions are on with a few infrastructure-focused PE majors such as
Macquarie SBI Infrastructure Fund (MSIF), Morgan Stanley Infrastructure
Partners and JPMorgan Asian Infrastructure Fund. Kotak Mahindra Bank and
Macquarie are jointly advising GVK on the sale process.
It is learnt that GVK has plans to
raise about $600-650 million (Rs 3,300-3,500 crore) through the sale. GVK
Airport Holdings operates the Mumbai and Bangalore airports. This is the second
time that it is looking for a buyer for the airports business. Earlier, Changi
Airports International, a wholly owned subsidiary of the Changi Airports Group,
backed out of investing Rs 2,200 crore for a 26 per cent stake in GVK’s airport
subsidiary, citing regulatory uncertainties.
“We do not comment on speculation.
We will share whenever there is any development,” said a GVK spokesperson in
response to an emailed query.
Investment in the airport business
is not new for Macquarie SBI Infrastructure. Last year, it had invested about
Rs 890 crore ($200 million) in GMR Airports Holding, which runs the Delhi and
Hyderabad airports. When contacted, a Macquarie Group spokesperson said, “We
don’t comment on market speculation.”
Gautam Bhandari, managing director,
India, Morgan Stanley Infrastructure Partners, did not respond to calls and
text messages. An email sent to a Morgan Stanley spokesperson did not elicit
any response. A JPMorgan spokesperson said “no comments” on the matter.
GVK had been progressively buying
stakes from former partners in Bangalore International Airport Ltd (BIAL) and
Mumbai International Airport Ltd (MIAL). It had acquired the stakes of Siemens,
Larsen & Toubro and Bid Services of Mauritius. GVK is now the largest
shareholder in both these airport projects.
It had taken a debt of Rs 613 crore
for the BIAL stake increase and Rs 1,150 crore for MIAL. The projected total
debt of GVK Power and Infrastructure is around Rs 13,884 crore, according to an
ICICI Direct research report.
“Currently, the foreign players are
confused with the government stand and, hence, are delaying their decision,”
Deepak Purswani and Bhupendra Tiwary of ICICI Direct said in a report.
Reducing debt is a major concern for
GVK, as high interest rates have been eating into the company’s earnings. “The
interest expense jumped over 200 per cent year-on-year, mainly due to an
increase in debt to increase stakes in the Mumbai and Bangalore airports, and
higher interest rates,” said Vibhor Singhal of MG Global, commenting on the
company’s results.
Cost escalation for the the
international airport in Mumbai has become a cause for worry. The airport has
seen a cost overrun of Rs 2,700 crore to Rs 12,500 crore.
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