Shares of GVK Power and Infrastructure, which operates the Mumbai airport, were up over 6% today in early trade on BSE. The share price soared on the back of an announcement by the company that its board has approved the sale of its remaining 10% stake in Bangalore International Airport Ltd (BIAL) to Fairfax India Holdings Corporation for Rs 1290 crore. At 1:15 pm however, the stock was down 1.18% at Rs 5.87.
The company had made the announcement after market hours on Friday, 2 June 2017. The move will help it reduce the debt burden and focus on Mumbai and Navi Mumbai airports, it said. The transaction is slated to be completed in July, after which GVK co-chairman GVK Reddy and managing director Sanjay Reddy will reportedly resign from the airport’s board and management.
On March 24, GVK had sold 33% in the airport to Toronto-listed Fairfax, the Indian unit of billionaire Prem Watsa’s investment company, for Rs 2,202 crore. Fairfax had also bought another 5% in the airport company from Flughafen Zurich AG, taking its holding to 38%. The latest deal takes its total ownership in India’s third-busiest airport to 48%.
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“Notwithstanding this sale, the airports sector will continue to be a core focus area for GVK. We had entered BIAL in 2010 when the airport was going through a tough phase as the capacity was severely constrained. Over the last seven years we have worked very hard to transform BIAL into a world-class airport. The airport is now ready for another phase of expansion with a new runway and a new terminal to be constructed. However, we have decided to part ways with BIAL as deleveraging is top priority,” GVK Reddy, Founder Chairman and MD, GVK, said in a statement.
The Navi Mumbai airport for which the group won the contract this year will now be a priority. “Our immediate focus will now be on Mumbai and Navi Mumbai airports, and on selectively evaluating privatisation opportunities. The reduced debt burden gives us flexibility and releases management bandwidth to focus on these projects; capacity optimisation and real estate development will be the key focus areas for the existing Mumbai airport. The government’s focus on developing the aviation sector also presents attractive growth opportunities and we are evaluating these,” Reddy said.