Prem Watsa’s Fairfax the buyer; GVK will use proceeds to retire debt
GVK Power and Infrastructure said on Monday it will divest a 33% stake in Bangalore International Airport (BIAL) to Canadian investor Prem Watsa-led Fairfax India Holdings Corporation and Fairfax Financial Holdings, through its wholly owned subsidiaries in Mauritius, for Rs 2,149 crore ($321 million). The transaction values BIAL at around Rs 8,000 crore, given the debt on its the books is approximately Rs 1,500 crore.
The highly leveraged infrastructure player had a gross debt of Rs 24,872 crore at the end of March 2015, data from Bloomberg showed. It will use the proceeds of the sale to pare debt which it had taken to acquire the 43% stake in BIAL for Rs 1,800 crore. The total debt in GVK’s airports portfolio is an estimated Rs 4,200 crore.
The GVK Group reported a consolidated net loss of Rs 279 crore for the three months to December 2015 compared with a net loss of Rs 209 crore in the quarter ended December 2014. Its total income during the period went up 29% year-on-year to Rs 1,038.92 crore.
The company is expected to post an Ebitda (earnings before interest tax depreciation) of around Rs 1,200 crore in FY16 on estimated revenues of Rs 2,600 crore. GVK’s airports division reported revenues of Rs 727.20 crore in the December quarter. The GVK stock closed 6.43% higher on Monday at Rs 7.12 per share on the BSE.
BIAL owns and operates the Kempegowda International Airport Bengaluru (KIAB) under a 30+30 year concession agreement with the central government. Between April and January FY16, the airport handled a total of 12.9 million domestic passengers, up 25.4% year-on year, and 2.8 million international passengers, up 15.3% y-o-y, making it the third busiest airport in the country.
While Terminal 1 is equipped to handle 20 million passengers per annum, the addition of another terminal will take the capacity to 55 million passengers annually.
After the sale, GVK will hold 10% in BIAL. Karnataka State Industrial and Infrastructure Development Corporation and Airports Authority of India each hold a 13% stake while Siemens Project Ventures holds 26%. Flughafen Zurich holds the remaining 5%. KIAB is the first greenfield airport in India to be built via a public-private partnership and began operations in May 2008.
Bangalore Airport & Infrastructure Developers Private (BAIDPL), a subsidiary of GVK Power & Infrastructure, had acquired 17% of the outstanding equity shares from L&T Infrastructure Development Projects and 12% shares from Zurich Airport. Further, during 2011-12, BAIDPL acquired 14% from Siemens to increase its stake to 43%. The company will partner with Watsa in developing Kempegowda International Airport through its next stage of expansion — building Terminal 2 and a new runway, said GVK Reddy founder, chairman and managing director, GVK.
GVK Airport Developers, a wholly owned subsidiary of GVK Power & Infrastructure, had initiated last year a process to reduce its debt obligations to its lenders.
“This is an important milestone in deleveraging our balance sheet, and all proceeds from this stake sale shall be used to bring down our debt obligations to our lenders,” Reddy said.
“This is a partnership between Fairfax and GVK. We will work closely with all stakeholders to manage our stake in BIAL going forward, and will support GV Sanjay Reddy to continue to lead the management team as managing director of BIAL and GVK Reddy will continue as co-chairman,” said Prem Watsa, chairman of Fairfax India and chairman and CEO of Fairfax.