Adani Group is evaluating a plan to pick up a stake in Bangalore International Airport Ltd (BIAL), three people aware of the development said.
“The Adani Group has been assessing multiple approaches to buy a stake in the airport for some time. Discussions have taken place with Fairfax, and the conglomerate is keen to participate in the bidding for Airports Authority of India (AAI)’s 13% stake,” 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 another 30 years.
Spokespeople for Adani Group, Fairfax, and AAI did not respond to Mint’s queries.
In 1999, the airport project was awarded to a Siemens Project-led consortium comprising Unique Zurich and L&T for a 40:17:17 partnership. AAI and Karnataka State Industrial and Infrastructure Development Corp. held 13% each in the airport.
In 2009, GVK Power and Infrastructure acquired L&T’s 17% stake, besides 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 for $321 million from GVK Power and Infrastructure to become the controlling stakeholder of the airport. It subsequently purchased 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% from Siemens Project for $67 million.
Fairfax holds a 54% stake in BIAL. The other shareholders in BIAL include Siemens Project Ventures GmbH (20%), AAI (13%), and Karnataka State Industrial and Infrastructure Development Corp. (13%).
“The AAI is almost ready with its bid document for the 13% stake it has in the Bengaluru airport. The expectation is that the entire process for the stake sale should be completed by next year. If all things are in place, the authority could invite bids in the next two months,” the second person said, also seeking anonymity.
While the returns from brownfield airports, such as Delhi and Mumbai, were a crucial revenue stream for AAI, returns from the Bengaluru and Hyderabad airports have been insignificant. Therefore it decided to divest its stake in these greenfield airports, the person added.
While the share of the revenue for AAI is 45.99% for Delhi international airport and 38.7% for Mumbai international airport on gross revenue, for the Bengaluru and Hyderabad airports it is 4% of gross revenue.
The Adani Group already runs eight airports across India, handling nearly 20% of air passengers in India. Adani Group-controlled Navi Mumbai airport 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. According to the agreements with AAI, the group pays a per-passenger fee to the state-owned entity, which is revised annually based on the Consumer Price Index numbers for Industrial Workers CPI(IW). As stipulated in the concession agreements, the group must operate, manage, and develop the airports for a 50-year period.
The Adani Group also acquired a 74% stake in Mumbai international airport in July 2021 by picking up GVK Group’s 50.5% stake and a 23.5% stake from ACSA Global Ltd (ACSA) and Bid Services Division (Mauritius) Ltd (Bidvest). As a result, the group also operates Navi Mumbai airport.
Based on September data from AAI, airports operated by the ports-to-energy conglomerate accounted for 22% of domestic and international aircraft traffic, with Mumbai leading with 12%.
In September, BIAL recorded nearly 9% of the domestic air traffic, and Delhi was at over 17%.
The seven operational operators handled more than 22% of air passengers in September, with Mumbai’s contribution at 13%-plus. Bengaluru airport handled 9.6% of air traffic, and Delhi topped with more than 20% of air traffic in India.
For cargo, the Adani Group-run airports handled 29.4% of freight across airports in September. Bengaluru airport was the third largest cargo handler, with a share of 13%, after Delhi and Mumbai. “Multiple rounds of preliminary discussions have taken place between Fairfax and Adani Group, but so far, there has been no decision. But it is aggressive about expanding its airport business,” the third person said.
For the Gautam Adani-led group, airports are not just about the airside segment; their plans involve leveraging the cityside development and creating airport cities that serve as destination magnets, especially for non-passengers and cityside dwellers. In addition, according to its earnings presentation, it plans an integrated real estate development, which would involve facilities across retail, healthcare, entertainment and mixed-use developments.
Currently, its airports are seeing a consumer base of over 200 million, including passengers and non-passengers. It wants to increase it to 300 million by 2026. On the real estate side, the group plans to tap the potential of more than 650 acres of real estate available across its portfolio of eight airports.