AAI may issue Rs 5,000-cr bonds for airport projects

India’s state-owned airport agency, Airports Authority of India (AAI), is likely to issue bonds to finance airport projects. Estimates suggest that airport projects will require more than Rs 20,000-crore investment over the next five years. The expenditure will primarily be meant to build seven greenfield airports and step up the capacity of terminals and runways at 46 existing airports.

“We have planned a massive capital expenditure for upgrading our airport infrastructure. We are preparing to issue bonds by tapping the capital market,” Guruprasad Mohapatra, chairman, AAI, told Business Standard.

While Mohapatra did not specify the amount that AAI is planning to raise via bonds, a senior official said it could be around Rs 5,000 crore. 

“The issuing of bonds could come sometime in the next fiscal year (FY2018-19) and we are planning to raise around Rs 5,000 crore through 10 year-maturity bonds. We will consider both domestic and international capital markets,” the official said.

AAI, which has the status of a miniratna organisation, has consistently booked profit and returned handsome dividend to the government — mainly due to the revenue it earned as concession fees from Delhi and Mumbai airports. For FY2016-17, AAI recorded a profit of Rs 31,115 crore over a revenue of Rs 12,542 crore. The healthy balance sheet has helped it earn favourable rating from credit agencies which Mohapatra believes will be useful while raising funds through the bond route. “We have been always highly rated by the credit rating agencies. Bonds, too, will have a good response,” he said. Credit rating agency CRISIL recently reaffirmed its AA/Stable rating for AAI’s Rs 3,000-crore long-term borrowing plan.

“The strategic importance to the Government of India is underpinned by the fact that the authority manages the entire Indian airspace and adjoining ocean areas. Backed by established track record and control over 125 airports in India, the organisation will retain its strong market position. The financial risk profile is expected to remain robust, driven by large net worth and healthy cash accrual,” CRISIL said.

A recent report by rating agency Icra pointed out that the Indian aviation sector will need an investment of nearly Rs 2.4 lakh crore to treble the airports capacity in the next 10 years, compared with the Rs 52,000-crore that has been invested over the last decade across various airports in the country. The report said that between FY14 and FY17, around 57 per cent growth was recorded in passenger traffic.

Many mega infrastructure projects are often partly funded by bonds, a financial instrument used by borrowers to raise finances from a variety of investors willing to lend them money over a period of years, or even decades. Government-owned infrastructure agencies are increasingly looking at bond markets to fund projects as the Narendra Modi government plans a massive push to infra. State-owned National Highways Authority of India recently raised around Rs 3,000 crore by selling rupee-denominated masala bonds on the London Stock Exchange.