NIIF plans aggressive foray into airport sector, hunts for investors

The National Investment and Infrastructure Fund (NIIF), a government-backed sovereign fund, has planned a foray into the airport sector.

The fund, which invests primarily in infrastructure assets, has bid for four of the six airports the government has put up for sale, said two persons aware of the development. Sources said the NIIF had tied up with Zurich Airport to bid for the airports.

“The NIIF has partnered Zurich Airport to bid for the airports in Ahmedabad, Jaipur, Lucknow and Mangaluru,” said a source, adding that the equity structure of the partnership hadn’t been finalised.

The government is offering a concession period of 50 years to the winning bidder, who will be responsible for the operations and management of existing airport assets as well as for developing city side infrastructure.

The person added that beside the four airports NIIF is also in talks with GVK group and South Africa’s Bidvest group to buy a stake in Mumbai International Airport and has also bid for the greenfield airport project in Bhogapuram of Andhra Pradesh.

NIIF, the persons said is looking to raise a fund of $2 billion to invest in long gestation infrastructure projects in the country and airports are one of the primary targets.

To date, the NIIF has registered three funds — NIIF Master Fund which invests directly into companies, a fund of funds which invests in funds that are managed by third parties and a third long gestation fund which is in the design stage right now 

“The NIIF is bullish about the growth in airport sector. They are in talks with global airport companies, and other investors looking to bid for projects across the country,” the person briefed on the matter said.

Consultancy firm CAPA estimates that India’s aviation sector needs investment to the tune of $45 billion by 2030. With India being the world’s fastest growing aviation market, its airports are grappling with serious capacity constraints.

While GVK is looking to sell a substantial stake in Mumbai Airport to reduce its debt burden, Bidvest Group, which has about a 13.5 per cent stake in Mumbai Airport has also begun a parallel process to sell its entire stake.

A consortium led by GVK holds a 74 per cent stake in Mumbai airport. GVK owns a 50.5 per cent stake, while the Bidvest Group, and Airports Co. South Africa Ltd hold 13.5 per cent and 10 per cent, respectively. The remaining 26 per cent is held by the state-run Airports Authority of India (AAI).

Bhogapuram International Airport will be constructed at Bhogapuram, near Vishakhapatnam in AP. It will be built at an approximate cost of Rs 4,200 crore. “For the Bhogapuram project the fund has tied up with German airport operator AviAlliance and has bid aggressively. The winner will be declared sometime by first week of March,” the person said.

The NIIF, which has been set up on the lines of a sovereign wealth fund with 49 per cent equity held by the Union government, is a platform that intends to invest the kind of long-term capital into the infrastructure sector.

It has a planned corpus of ₹40,000 crore. It was launched as an investment vehicle to fund commercially viable greenfield, brownfield and stalled projects. While the government brought in 49 per cent of the capital, the remaining capital requirement was raised from strategic anchor investors, including sovereign wealth and pension funds and multilateral financial institutions.

It had recently announcement of investment of $400 million (around Rs 2,750 crore) from Singapore’s sovereign fund Temasek.

In a previous interview, NIIF Chief Executive Officer Sujoy Bose estimated that India needs about $200 billion of investments a year in the infrastructure sector. Currently, investment is around $110 billion per year. 

“Therefore there is a gap of $90 billion between what is coming into and what is needed. We believe that with the kind of growth that India is going through and the pace of growth of revenues are in these kinds of projects, there will be plenty of returns to be have over a period of time,” Bose had said.

SPREADING WINGS

• NIIF has tied up with Zurich Airport to bid for Jaipur, Ahmedabad, Lucknow and Manglore airports 
• The fund has tied up AVi Alliance to bid for Bhogapuram Airport 
• It is in talks with GVK group to buy stake in Mumbai Airport 
• NIIF is designing a fund of $2 billion to invest in long-gestation infrastructure projects in the country. Airports are one of the primary targets