If all goes as planned, infrastructure major GVK Power & Infrastructure Ltd will complete the acquisition of a 13.5% stake of its South African partner Bidvest in Mumbai International Airport Ltd (MIAL) in the next 30 to 60 days.
The company is at an advanced stage of negotiations with Bidvest and the deal is said to be almost done except some final detailing.
“We are talking to Bidvest. The deal should happen in the next couple of months,” GVK’s CFO Isaac George told DNA.
However, he refused to divulge the price at which negotiations are being held. “We have signed a non-disclosure agreement and we can’t indicate at any price related issues,” he said.
GVK currently holds about 37% in MIAL while Bidvest holds about 27%. The Airports Authority of India owns 26% of the company and Airport Company South Africa 10%.
“We are interested in taking our stake to 51% in MIAL,” George said. With the acquisition of 13.5% from Bidvest, the total holding of GVK in MIAL would go up to 50.5%.
Though Bidvest holds about 27% in the company and is looking at an exit option, the South African company is under an obligation to hold a minimum of 10% equity for seven years. Beyond this, the company is free to sell its stake to any financial investor though the first right of refusal is with the GVK group.
GVK recently acquired a 12% stake in Bengaluru International Airport Ltd (BIAL) from Zurich airport for Rs 484.6 crore. Even in this project, the company is looking at an option of increasing the stake to 51% and is said to be engaged in talks for buying L&T stake in BIAL.
According to sources tracking the deal, MIAL is valued at about $1.8 billion. However, most of the valuation is based on the opportunity to monetise the real estate and other commercial property attached to the airport. MIAL, a special purpose vehicle for operating the Mumbai airport, has a contract to manage the airport for the next 30 years.
Though the company is keen on increasing its stake in both Mumbai and Bangalore airports to 51%, analysts feel that the consolidation of stake in few projects instead of spreading them would be a risky proposition.
However, GVK’s vice-chairman Sanjay Reddy recently told analysts that the perception of risk was not well founded.
“We know these projects (where the company has equity holding) in and out. We know the potential value kickers, value drivers, we know what are the opportunities, what are the problems, whereas, yes, we certainly should also spread ourselves in getting to other projects, and our focus is going to be that over the next few months and years.”
The company is modernising the Mumbai airport by building new terminals. Terminal 1C is likely to be completed by December this year and is expected to be ready for operations early next year.
Terminal 2 is likely to be ready for operations in October 2010. On the airfield side, the runway is likely to be ready by January 2010.
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