The first phase is expected to require an investment of Rs 5,500 crore, for capacity of 10 million passengers annually. It is to be completed in three to four years. The project will be implemented by the Mumbai International Airport Ltd (MIAL, run by the GVK group), through a joint venture in which they will have 74 per cent. City and Industrial Development Corporation (Cidco), an agency of the state government, in charge of the project, will have the rest.
Source: India Ratings & Research
According to sources, with debt of Rs 10,600 crore on the books of MIAL, some members in the project monitoring committee doubted if the body would be able to raise the needed funds, a combination of equity and debt. Especially as it had not met its own target of monetising land around the Mumbai airport, with the gap having to be met through bridge loans. Their concern was that the airport project not get stuck.
MIAL is a joint venture between GVK group (50.5 per cent, held through GVK Airport Holdings), Airports Authority of India (AAI, 26 per cent), Bid Services Division (Mauritius) (13.5 per cent) and ACSA Global (10 per cent).
MIAL has the right to develop 194 acres around Mumbai airport but has only been able to monetise 2.5 acres.
However, this year, it finalised bids for another 17 acres. “The development potential of these 17 acres is 0.34 million sq metres (3.6 mn sq ft). Bids have been won by construction companies and developers like Ashoka Buildcon, Neelsiddhi, Shrem and Karmvir. The lease rent potential is Rs 130 per sq ft per month,” said a source.
In a May-end report, credit rating agency CRISIL said cash flow from the 17 acres’ land parcels is expected in FY18. “Future proceeds would be utilised towards repayment of securitised loan, as well as towards the airport project. Traction in real estate monetisation would be a key rating sensitivity factor,” it said.
Originally, MIAL had planned to generate Rs 1,000 crore from land leases by 2014 to fund the modernisation of Mumbai airport. It could only garner Rs 207 crore in the form of security deposits. As a result, MIAL was forced to borrow around Rs 650 crore from banks. The airport’s international terminal is to be developed into a Sky City, featuring hotels and commercial spaces. The project kicked off in 2014, with MIAL inviting bids for a few land parcels. The same year, it struck a deal with Oasis Realty to lease 5.5 acres near the international terminal for Rs 580 crore in deposit and rent but the deal fell through.
A GVK group spokesperson declined comment on land monetisation. However, he noted, the Phase-I project cost was to be based on finalisation of the master plan, with funding through equity contribution by MIAL, Cidco and debt. “MIAL is fully confident of funding the project through its internal resources and debt,” he said. Credit rating agencies support the view that the company would be able to raise the funds.
Especially after having recently restructured loans of Rs 9,126 crore with banks, which agreed to refinancing the debt and extending the loan tenure. This, they say, has made the ability to service the debt much more comfortable.
Under the scheme, Rs 6,140 crore of long-term loan, Rs 880 crore of fund and non-fund based working capital and an Airport Development Fund (ADF) loan of Rs 2,155 crore have been sanctioned by a consortium of banks, to refinance and retire the previous loans.
The tenure for the new loans is 14.5 years or 85 per cent of the tenure of the concession period and with monthly interest of 9.3 per cent. The company has pledged 74 per cent of MIAL’s shares, given an equal footing charge over the cash flows (under escrow, in which the cash surplus after statutory payments to AAI is to be maintained), as well as the first charge of the ADF escrow account. It has also pledged that any shortfall will be met by the key shareholders.
CRISIL says the company is in a strong marketing position. It has seen compounded growth rate in passenger traffic of more than seven per cent (45.1 million) in 2016-17, with growth over 12 per cent in the past three years, operating at near-full utilisation.
Non-aero revenues are expected to have healthy growth over the medium term, with contribution to total revenue increasing from 43 per cent in 2015-16 to over 60 per cent in the medium term.
All these positive factors, it has said, partially offsets the regulatory risks (aero revenues are fixed by the sector regulator) and implementation risks of a new airport in Navi Mumbai. However, its debt service ability, they say, will be constrained by the fact that they pay 38.7 per cent revenue share to AAI.