Adani eyeing stake in Bengaluru airport

“Adani Group has been evaluating several approaches to buy stake in the airport for some time. Discussions have been held with Fairfax, and the group is keen to participate in the bid for the 13% stake of the Airports Authority of India (AAI),” said one of the three people, seeking anonymity.

BIAL owns and operates the Kempegowda International Airport in Bengaluru under a 30-year concession agreement with the central government. It has the option to renew the agreement for the next 30 years.

Spokespersons for Adani Group, Fairfax and AAI did not respond to Mint’s queries.

In 1999, the airport project was awarded to the unique 40:17:17 partnership led by the Siemens project consortium consisting of Zurich and L&T. AAI and Karnataka State Industrial and Infrastructure Development Corporation each held 13% share in the airport.

In 2009, GVK Power & Infrastructure acquired L&T’s 17% stake in addition to Unique Zurich Airport’s 12% stake. In 2011, it bought a 14% stake from Siemens Project Ventures, and in 2016, Fairfax bought a 33% stake from GVK Power & Infrastructure for $321 million to become the airport’s controlling stakeholder. It later bought an additional 5% stake from Zurich Airport. In 2017, GVK exited the project by selling the remaining 10% to Fairfax to reduce debt. In 2018, Fairfax acquired 6% of the Siemens project for $67 million.

Fairfax holds 54 per cent stake in BIAL. Other shareholders of BIAL include Siemens Project Ventures GmbH (20%), AAI (13%), and Karnataka State Industrial and Infrastructure Development Corp (13%).

“AAI is almost ready with its bid document for its 13% stake in Bengaluru airport. It is expected that the entire stake sale process will be completed by next year. If all goes well, the authority may invite bids in the next two months.”

While returns from brownfield airports such as Delhi and Mumbai were a significant revenue stream for AAI, returns from Bengaluru and Hyderabad airports have been negligible. So it decided to sell its stake in these greenfield airports.

While the revenue share for AAI is 45.99% for Delhi International Airport and 38.7% for Mumbai International Airport on gross revenue, it is 4% of gross revenue for Bengaluru and Hyderabad airports.

The Adani Group already runs eight airports across India, which handle about 20% of air passengers in India. The Navi Mumbai airport, controlled by the Adani Group, is expected to be operational by 2024.

In February 2019, the group won bids for six AAI airports including Lucknow, Mangaluru, Ahmedabad, Jaipur, Guwahati and Thiruvananthapuram. As per the agreement with AAI, the group pays a per-passenger fee to the state-owned unit, which is revised annually on the basis of the Consumer Price Index (CPI) for industrial workers. As stipulated in the concession agreements, the group must operate, manage and develop the airports for a period of 50 years.

Adani Group acquired 74% stake in Mumbai International Airport in July 2021 by taking over 50.5% stake from GVK Group and 23.5% from ACSA Global Limited (ACSA) and Bid Services Division (Mauritius) Limited (Bidwest). Consequently, the group also operates Navi Mumbai Airport.

Based on AAI’s September data, airports operated by the Port-to-Energy group account for 22% of domestic and international air traffic, with Mumbai leading with 12%.

In September, BIAL recorded around 9% of domestic air traffic, and Delhi accounted for over 17%.

Seven operating operators handled more than 22% of air passengers in September, with Mumbai contributing more than 13%. Bengaluru airport handled 9.6% of air traffic, and Delhi topped India with over 20% of air traffic.

For cargo, airports operated by the Adani Group accounted for 29.4% of the freight traffic at airports in September. Bengaluru airport was the third largest cargo handler after Delhi and Mumbai with a share of 13%. “There have been several rounds of preliminary discussions between Fairfax and the Adani Group, but no decision has been taken yet. But it is aggressive in expanding its airport business.”

For the Gautam Adani-led group, airports are not just about the airside segment; His plans include taking advantage of the city’s growth and creating airport cities that serve as destination magnets, especially for non-travelers and city residents. In addition, according to its earnings presentation, it is planning an integrated real estate development that will include facilities for retail, health care, entertainment and a mixed-use development.

Currently, its airports are witnessing a consumer base of over 200 million including passengers and non-travellers. It wants to increase this to 300 million by 2026. In terms of real estate, the group plans to tap the potential of over 650 acres of real estate available across its eight airports portfolio.