Citi wants to join B'lore airport lending consortium

Citigroup India has evinced interest in being a part of the financial consortium that will jointly fund the proposed Rs 1,300 crore Bangalore International Airport.

Citigroup India, CEO, Sanjay Nayyar said, "We are working on our plans to be part of the consortium of financial institutions, lead by ICICI Bank, funding the airport. We haven't had any exposure to infrastructure projects in Karnataka and if this works out, it will be our first major foray in this state."

The financial consortium will lend in all Rs 630 crore for the project and the process of financial closure is being worked out. It is expected within the next couple of months. The majority 74 per cent stake in the project will be controlled by Siemens Ventures, Unique Zurich Airport and Larsen & Toubro.

In addition to the funding, Karnataka will pump in Rs 350 crore as part of its 13 per cent stake. It will be spread over the entire construction period of 33 months. Rs 275 crore will be the base amount and Rs 75 crore, the contingency fund. The other 13 per cent in the project will be held by the Airports Authority of India.

Nayyar further added that Indian infrastructure projects are best suited for financial institutions who have had experience in the Indian geography and not just any foreign fund willing to invest in India.

"Infrastructure funding is high-risk and low-return investments and one has to understand the workings of the Indian infrastructure projects before committing. Adequate risk mechanisms should be built-in based on aspects like procedural delays one can expect in infrastructure projects and this is best understood by those who have had a wide span of experience," Nayyar noted.

The statement of Nayyar gains more significance on the backdrop of a statement from Unique Zurich Airport which is reportedly getting increasingly agitated over the frequent roadblocks arising in securing clearances for the project.

It has stated that it will consider pulling out of the project if the financial closure is not attained within this year. Zurich Airport holds 17 per cent stake in the project and will be responsible for the complete operations of the airport.

The project has faced many glitches including the key concession agreement from the government. The closure of the existing HAL airport in Bangalore was resolved only recently and an integrated airspace managed plan is still due from the Centre.

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Tying up

• Keen to join group headed by ICICI Bank
• Rs 630 to be lent for the project
• Bank calls for adequate risk mechanisms