A consortium of banks has agreed to lend up to Rs 5,000 crore to the MIAPL, which won the bid for modernising and expanding the Mumbai International Airport.
Bank consortium readies Rs 5000 cr loan.
HYDERABAD: A consortium of banks has agreed in principle to lend up to Rs 5,000 crore to the Mumbai International Airport Pvt Ltd (MIAPL), which won the bid for modernising and expanding the Chhatrapati Shivaji International Airport.
However, the company is unlikely to avail the entire funding, given its limited requirements in the initial phase.
MIAPL will spend about Rs 3,000 crore to bring the airport to international standards within the next three years, its new chairman G V Krishna Reddy told DNA. The company will invest an additional Rs 5,000 crore in the second phase.
MIAPL is a joint venture company that recently became a majority stakeholder in the Mumbai airport. It beat nine other bidders to win the modernisation and expansion contract with a revenue share offer of 37.6% to the government of India.
The consortium comprises the Hyderabad based GVK group (with an equity of 37%) and South African companies Airports Company South Africa Ltd (with 10%) and The Bidvest Group Ltd (27% equity participation). The Airport Authority of India will retain 26% holding in the company.
While the Operations Management and Development Agreement (OMDA) between the private developers for the Mumbai and Delhi airports and the government was signed on April 4, the courts gave the green signal to the transfer of the airports to them on April 19, clearing the last hurdle.
The first board meeting of the new company is slated to be held on April 28 when the new members will be inducted on the board. Sanjay Reddy, director in the GVK Group, will take over as managing director of MIAPL.
Given that it is a profit-making brownfield airport, funding is not likely to be a problem. In fact, the group is in the envious position of being able to choose the best possible financing options, Reddy said.
The Mumbai International Airport had revenues of Rs 950 crore in the previous financial year of which an outright payment of Rs 300 crore every year has to be made to the air traffic control authorities.
The airport, which is said to have about 45 landings every hour at peak times, has a passenger traffic of 18 million people every year. It is projected to grow between 20-30% every year, a robust growth rate by any standards.
Even after the estimated Rs 400 crore committed revenue share payout to the government every year, there would be substantial scope for maintaining and developing the airport over the 30-year concession period.
MIAPL has the option of continuing with the airport for another 30 years after the expiry of the concession period. "We have decided to pump in whatever resources are required to bring the airport to international standards even if it means delaying profits for some years," Reddy said.
A significant component of the investment will be for the relocation and rehabilitation of the 25,000 of the 85,000-odd slum hutments for building a second runway for the airport.
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