To partially monetize certain assets that include selling 33% in BIAL to Fairfax within the next fortnight; to raise additional debt through subsidiary MIAL
The promoters of Mumbai International Airport Ltd (MIAL) has started reducing the huge debt of its parent company GVK Power & Infrastructure (GVKPIL) to fund the Rs 17,500 crore greenfield Navi Mumbai International Airport.
The Hyderabad-based company, which has a debt of around Rs 25,000 crore, including certain non-performing loans, has begun the process with certain assets being partially monetized to reduce the debt.
A Issac George, director & chief financial officer, GVKPIL, told DNA Money, "In the next fortnight, the transaction pertaining to the sale of 33% stake in Bangalore International Airport Ltd (BIAL) to Fairfax Holdings will happen. All approvals have come in. This transaction would raise around Rs 2,200 crore for the company to repay existing debt."
"As on December 31, 2016, GVKPIL had accumulated losses and the company has incurred losses during the preceding two years. The company has delayed payment of loans and interest and certain loan accounts have been classified as non-performing by banks," said GV Krishna Reddy, chairman & managing director, in the Q3 result statement.
According to the unaudited standalone financial results, net loss of the company for the nine months ended 31, 2016, shot up to Rs 6,516 crore from Rs 1,798 crore over the year ago.
However, during the third quarter, the company managed to substantially reduce its net loss to Rs 71 crore from Rs 1,341 crore in the previous quarter.
Despite these difficulties, officials are positive about raising additional debt through MIAL.
Rajeev Jain, chief executive officer, MIAL, said, "MIAL had submitted bid and not GVKPIL. Funds will be raised by MIAL and not the parent. Therefore, there will not be any problem in raising loans."
GVKPIL-led MIAL, a special purpose vehicle, won the bid for the project last week. Now MIAL will form another SPV for the project wherein 26% of equity will be held by City and Industrial Development Corporation (Cidco) and its nominees, and the rest, by MIAL. In MIAL, 26% stake is held by Airports Authority of India.
According to Jain, financial closure for the airport will be achieved by 2017-end. "This leaves a lot of time to initiate the process of getting into discussions with the lenders. We haven't yet finalised how much debt will be raised for the latest project."
Speaking about issues related to borrowing for the project, George said, "The pedigree is fantastic. Firstly, it's a greenfield project. Secondly, it is an international airport, a subsidiary of MIAL."
According to company insiders, another factor that should not hamper the borrowing is the overall period for which the funds are needed. Even if it is assumed that the company needs 80% of the estimated Rs 17,500 crore for the project, it will be required over a period of five years.
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