“Most recently, BIAL added a plan for a third terminal and related infrastructure for an incremental investment of approximately $1 billion, taking the capacity of the airport beyond 90 million passengers by 2038,” said Fairfax.
India has invested $653 million to acquire 54 per cent of BIAL, which implied equity value of approximately $1.2 billion for the whole company. The valuation (including foreign currency translation) of Fairfax India’s interest in BIAL increased by $726 million in 2019 to $1.4 billion, implying an equity value of $2.7 billion.
BIAL’s revenues for 2019 declined by nine per cent to $211 million, largely due to a 35 per cent drop in aero revenue and PAT declined 44 per cent to $54 million. However growth in non-aero revenue partially offset the loss.
Despite Jet Airways, BIAL’s second largest customer, winding up operations in 2019, passenger traffic grew by around four per cent over the previous year to about 34 million passengers and cargo handled only dropped 1 per cent in the face of an economic slowdown that resulted in a 3 per cent drop in air cargo volume in India.
Going forward, besides increasing aero revenue, BIAL is looking at increasing non-aero revenue, including cargo handling, ground handling, fuel sales, food and beverage sales and duty-free shops amog others.
Last year, the drop in aero revenue was partially offset by a 24 per cent increase in non-aero revenue on the backdrop increase in passenger growth, availability of additional space, and the increasing propensity of passengers at the airport to make purchases.
BIAL will also monetise around 460 acres of land adjoining the airport that can be developed. The first development will be a 775-room 3 and 4-star combination business hotel. The project has been awarded to the Taj Group of hotels. A retail, dining and entertainment village will come up on around 23 acres of land. The third development will be business parks over approximately 130 acres of land that will be jointly developed in phases through a combination of land lease, joint development and own development models.
In addition to this, approximately 12 acres of land will be used for the development of an outlet mall and a 5-star hotel. A first of its kind large concert arena in the region, on approximately 6 acres of land, has been awarded to a consortium and is expected to be completed in 2021.
Bangalore’s historical population areas are getting congested, so the city is expanding in the airport’s direction. BIAL anticipates significant upside, over time, from monetisation of this real estate, said Fairfax.
Fairfax floated Anchorage Infrastructure Investments Holdings (AIIHL), in June 2019 as its flagship investment vehicle for airports and other infrastructure investments in India and plans to eventually transfer all of Fairfax's shares in BIAL to AIIHL.
In December 2019, Fairfax India
signed a definitive agreements with an investor whereby it will transfer 43.6 per cent of BIAL out of the 54 per cent that it owns in BIAL to AIIHL.