GVK ties up Rs 4,000 crore

Mumbai International Airport (MIAL), the joint venture company promoted by the GVK group, has tied up with the IDBI Bank-led consortium of banks to raise Rs 4,000 crore for implementing the Rs 7,000 crore modernisation project over 20 years.

The company will raise money from 12 banks, including IDBI and UTI Bank, at a rate of 215 basis points over the yield on the three-year government security. One basis point is onehundredth of a percentage point.

Since the yield on the three-year gilt is over 7 per cent now, the cost of loan works out to at least 9.20 per cent. The facility will have a 17-year maturity with a seven year moratorium.

The banks have been given an exit option from the loan at an earlier stage. MIAL is a 74:26 per cent joint venture between the GVK-SA consortium and the Airports Authority of India (AAI).

"MIAL plans to invest up to Rs 5,800 crore in seven years and the remaining Rs 1,200 crore will be invested in the next 13 years," GVK executives told Business Standard.

The modernisation of the Mumbai airport includes construction of a six-lane elevated highway from the Western Express Highway linking the airport terminal directly. The proposed highway will connect with the Mass Rapid Transport System (MRTS).

The city-locked airport may also have a parallel second runway, additional exclusive terminal for domestic and international operations and a cargo terminal.

The plan also includes a low-cost terminal for low-fare airlines. MIAL Managing Director G V Sanjay Reddy said: "MIAL shares 38.70 per cent revenue with the AAI. We target 55 per cent revenue from the non-aeronautical segment.

We will set up retail outlets, hotels, advertisements and parking slots for that. MIAL is aiming at handling 25 to 27 million passengers in the next seven years."

The project faces challenges ranging from limited land to stray dogs. "There are drains running through the airport, the Mithi River runs through it, there are slums encroaching on the land, there is a menace of dogs and birds, and there are nearly 400 pending litigations," Reddy said. "But we believe there is a lot of potential that can be unleashed," he said.

MIAL, which received charge of the Mumbai airport on May 3, will build, own and operate the airport for a period of 30 years. This can be extended by a further 30 years, before transferring the airport back to India's state operator.

MIAL estimates the Mumbai airport handled 17.7 million passengers and 490,000 tons of cargo last year.

MIAL, which has been operational for over a month, will prepare a master plan for the project by September.

Netherlands Airports Consultants B V (NACO) and Singapore-based Changi Airport are helping MIAL planning improvement in operations and management of the airport.