Over the past decade, airports in the country have been witnessing significant investments. There has been a surge in airport construction projects stemming from the increase in demand for air travel. Investor and lender sentiment has been positive owing to lucrative returns and a healthy project pipeline.
Equity moves
Airports have been receiving significant investments either at the parent company or the asset level, from both domestic and international investors. A notable example is the purchase of a stake by Fairfax India Holdings Corporation in Bangalore International Airport Limited. In 2017, Fairfax completed the purchase of a total stake of 38 per cent in the company. It purchased an additional 10 per cent stake in July 2017, and a further 6 per cent stake in 2018, taking its total share to 54 per cent. In December 2023, Fairfax acquired an additional 7 per cent share from Siemens Project Ventures GmbH, for a deal amounting to $175 million, following the purchase of a 3 per cent equity stake in June 2023. Fairfax now has 64 per cent ownership of the airport. Meanwhile, the Adani Group, after the award of six airports by the Airports Authority of India, purchased a 74 per cent stake from GVK and other owners of Mumbai Airport to take over the management of the Mumbai and Navi Mumbai airports in 2021.
The National Investment and Infrastructure Fund (NIIF) forayed into the airport sector with the announcement of a primary investment of Rs 6.31 billion in the form of compulsory convertible debentures in GMR Goa International Airport Limited (GGIAL), a special purpose vehicle (SPV) created to run and operate the greenfield Mopa airport, in December 2022. More recently, the NIIF agreed to invest up to Rs 6.75 billion in GMR Visakhapatnam International Airport Limited (GVIAL), an SPV created to develop and operate the Bhogapuram International Airport.
As for foreign investments, in 2020, Groupe ADP agreed to buy a 49 per cent stake in GMR Airports Limited. The sale was carried out in two phases. Following the merger of GMR Airports Limited with GMR Infrastructure Limited, Groupe ADP’s shareholding will stand at 32.3 per cent. Separately, GQG Partners recently bought an approximately 5 per cent stake in GMR Airports Infrastructure Limited through the open market, with the deal amounting to Rs 16.72 billion. Further, the upcoming Noida Airport, which is being developed by Yamuna International Airport Private Limited, is a 100 per cent subsidiary of Zurich Airport International AG. A concession agreement was signed in 2020 between the Uttar Pradesh Government and the Swiss-based firm.
Debt financing
Over the past few years, lending to the aviation sector has been seeing a positive trend. As of September 2023, India Infrastructure Finance Company Limited (IIFCL) has sanctioned loans amounting to Rs 88 billion to boost the country’s aviation sector. Of this, around Rs 40 billion has been disbursed for airport development projects. As part of its diversification strategy and to secure funding for infrastructure projects, the Power Finance Corporation sanctioned its maiden financing for a greenfield airport project in Andhra Pradesh in October 2023.
The GMR Group, in particular, has been on a fundraising spree for its airports over the past few months. In November 2023, GGIAL raised Rs 24.75 billion with the issuance of non-convertible debentures to repay existing debt and fund capex. JP Morgan, Tata Cleantech Capital, Aditya Birla Finance, ICICI Bank and IIFCL, among others, subscribed to the issue. Later, in December 2023, GVIAL secured funds worth Rs 32.15 billion from an IIFCL-led consortium for a period of 18 years. Further, in January 2024, GMR Airports Limited raised a Rs 8 billion debt facility from a consortium comprising Standard Chartered Bank, Varde Partners and Aditya Birla Special Situation Fund for a period of two years and eleven months. This is the second such funding received by the airport arm following a Rs 19.5 billion, three-year debt facility from Standard Chartered Bank, JP Morgan, Deutsche Bank, a Varde Partners entity and Trust Investment, the proceeds of which will be used for refinancing high-cost borrowings and partially investing in subsidiaries. With this, GMR Airports and the two SPVs have jointly raised approximately Rs 84 billion since November 2023 for refinancings and capex.
In sum
The Indian airport industry is on a high-growth trajectory, given the burgeoning demand for air travel and the creation of new airport capacities. Building up the project pipeline also provides the opportunity for privatisation. Revenue visibility and strong promoter backing are other factors driving investments in the sector. The momentum is expected to continue in the future, with the pool of investors and lenders expanding.
