Delhi airport firm to modify financing plan

The Delhi International Airport Limited (DIAL) has agreed to modify its innovative financing plan, wherein it proposed to charge high deposits and low rentals from the winning bidder for commercially developing 43 acres of land around the airport.

The plan had become a bone of contention, with the government asking DIAL not to proceed with its proposed plan despite a clean chit by the attorney general.

Civil aviation secretary Ashok Chawla told Business Standard that DIAL had agreed not to proceed with the existing deposit plan and will instead raise the required money either through preferential shares or partially convertible bonds.

DIAL is also unlikely to set up subsidiaries, as proposed earlier. Hotel and commercial development may be handled directly.

In other words, it may no longer continue with its old business plan of setting up subsidiaries to handle different portions of the business.

It is possible that the entire commercial development of 43 acres, including hotels and commercial development, may be handled directly by DIAL.

DIAL officials refused to comment, but confirmed they were likely to modify the plan and were consulting various stakeholders and lenders in that regard.

The capital expenditure programme in the first phase till 2010 was estimated at Rs 8,900 crore. This is expected to be funded by debt and equity in the ratio of 1.25:1, comprising equity and quasi-equity of Rs 3,950 crore and debt of Rs 4,940 crore.

The company had announced in December 2007 that it had secured a Rs 4,940-crore loan for the airport's modernisation and expansion. It has signed key financing documents with its project lenders for Rs 3,650 crore and foreign currency loans of $350 million to fund the project.

The equity component of Rs 1200 crore will be contributed by the consortium members, including the Airport Authority of India (26 per cent).

If the company decides to raise the entire amount through equity, the equity commitment of various stakeholders including AAI would become quite substantial.

Therefore, it is looking at issuing preference shares or convertible bonds, a kind of quasi-equity (debt till converted into equity). At the conversion stage, finances may be available through internal resources and so conversion may not be necessary.

DIAL officials have been forced to accept that their old plan won't work after opposition to it slowly gained ground. The issue started small, but soon blew up as the credibility of the public private partnership (PPP) projects began to be questioned.

Senior GMR sources have met various government officials across departments trying to make them see their side of the issue but to no avail.