NIAL turns to Indian banks to raise Rs 3,000 cr for Jewar airport

Noida International Airport (NIAL), the special purpose vehicle which will operate the Greater Noida International Airport in Jewar, is in talks with Indian banks to raise around Rs 3,000 crore to fund its first-phase expansion. 

Flughaffen Zurich, the operator of the Zurich International Airport that also won the bid to build and operate the Jewar airport last year, aims to complete the first phase of the project by 2024. 

By then, the airport will have the capacity to handle 12 million passengers in a year. Flughaffen Zurich holds 100 per cent shareholding in the Noida airport project.

"The State Bank of India is evaluating the proposal, and based on the outcome, many other public and private sector banks are likely to participate,” a senior banking source said. However, it could not be ascertained how many banks will be a part of this consortium. 

While the infrastructure industry had expected the NIAL to raise money from Switzerland, which has a cheap interest rate and lower currency hedging cost, Christoph Schnellmann, chief executive of the NIAL, said that since most of the airport's revenue in the initial phase will be in Indian currency, the company is raising money in India to hedge against fluctuating exchange rate.

"We continue our discussion with potential Indian banks. We are also in the process of providing credit rating to secure the funding," Schnellmann said.

On Wednesday, the NIAL submitted a master plan of the airport at Jewar to the Airports Authority of India (AAI) and regulator DGCA for technical examination.  Once the master plan is approved, the NIAL can close financing for the project.

Experts said it was a prudent approach by the NIAL to raise funding from India rather than Switzerland, as in the first phase, due to mostly domestic traffic, revenue earnings will be in Indian currency.

"During the initial phase, most traffic is likely to be domestic. Earnings from duty-free will be minimal. Since there will be minimal earning in foreign currency, it may be advisable to raise funding in INR to avoid forex mismatch,” said Sidharath Kapur, former executive director at GMR Airports.

Kapur, who was instrumental in raising dollar bonds for the Delhi and Hyderabad airports in 2017/18, said that for a greenfield airport, fully-hedged cost of forex borrowing may be initially high due to project construction risk, which Indian banks are more comfortable to take. Post commissioning and revenue stabilisation, refinancing rupee debt through forex bonds may be an efficient option.

While the pandemic has severely impacted the aviation sector pushing back expansion plans of global and Indian airports, Schnellmann said he expected the impact of the pandemic to subside by the time the airport is functional. 

"We believe in the potential of the Indian aviation market to bounce back from the impact of the pandemic. As of now, our traffic forecasts hasn't changed," Schnellmann said.

While the first phase of the project will have one runway and cater to 12 million passengers, by the fourth phase, the NIAL plans to have two runways and cater to 70 million passengers. The total investment in the first phase of the project will be Rs 4,666 crore. The airport plans to have five runways in future. 

Last year, the NIAL had outbid the Delhi International Airport, Adani Enterprises, and Anchorage Infrastructure Investments Holdings to win the 40-year concession for the Jewar airport.

Flughaffen Zurich offered a revenue share of Rs 400.97 per passenger. GMR, which had the right of first refusal, offered Rs 351 per passenger. It would have had the chance to match the highest bid only if its offer was within 10 per cent of it.