GVK to bid for airport projects in Asia, Africa
The group also plans to bid for domestic projects to modernize airports at Chennai, Kolkata, Ahmedabad and Jaipur
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Hyderabad-based GVK Industries Ltd, which operates the Mumbai and Bengaluru airports, will bid for airport projects in Asia and Africa, besides domestic projects to modernize airports at Chennai, Kolkata, Ahmedabad and Jaipur.
In an interview on Tuesday, G.V. Sanjay Reddy, vice-chairman with GVK Power and Infrastructure Ltd, said that his group is keen on airport management contracts in emerging economies of Asia and Africa.
“We will not be bidding for bigger airports at this point of time,” said Reddy, who was in New Delhi on Tuesday to attend a conference organized by the Confederation of Indian Industry (CII) and International Air Transport Association (IATA).
In June, GVK Power formed a new company called GVK Airport Services Pvt. Ltd, which will offer technical and consultancy services to airports in India and abroad. GVK is currently developing two airports in Indonesia as well.
Reddy said the GVK group has already submitted bids for developing a greenfield international airport in Navi Mumbai.
GVK is also looking at raising funds to repay debt from the airport business, Reddy said. The company’s airport business has around Rs.3,500 crore debt.
Asked whether the GVK group will hit the capital market with an initial public offer (IPO) of its airport business, Reddy said the company is exploring various options. “An IPO is one of the options,” Reddy said.
He also welcomed the central government’s move to adopt the so-called hybrid till revenue model at Mumbai and Bengaluru airports to fix tariffs.
In the single-till model, all airport activities—aeronautical and non-aeronautical—are taken into account to determine airport charges. Thus, airlines and passengers are charged less.
This model, currently followed at the Hyderabad airport, is also followed in UK airports, such as Heathrow and Gatwick.
In contrast, only aeronautical activities are considered under the dual-till model, which private airport operators prefer, since it will fetch them higher revenue.
Under the hybrid model, 70% of non-aeronautical revenues are also taken into account. This is the tariff model proposed for the upcoming Navi Mumbai airport. The privatized airports in Delhi and Mumbai also operate under the hybrid-till model.
Last month, GVK’s rival GMR Infrastructure Ltd, whose unit GMR Hyderabad International Airport Ltd (GHIAL) runs the Hyderabad airport, said the aviation ministry has asked the airport tariff regulator to adopt the so-called hybrid-till model to set tariffs.
Airports earn non-aeronautical revenues, such as rentals from retail outlets and airport parking charges, besides aeronautical revenues from flight operations.
Originally, the airport tariff regulator had suggested a single till model for the Bengaluru and Hyderabad airports.
Airline lobby group IATA has criticized the government for overturning the regulator’s decision. “IATA is totally wrong. There is no choice but hybrid-till. Airports need to be profitable for airlines to make money,” Reddy said.
Reddy said that the business model of Bengaluru was based on hybrid-till model, and it was conceived before airport tariff regulator came into existence. “Financing and operations of Bengaluru airports were modelled based on hybrid till,” Reddy said.
Commenting on the Mumbai airport, he said that the facility is currently handling 880 moves a day, comparable to many single-runway airports in the world. “We handle around 52 moves an hour, compared with 55 of Gatwick. We are planning to revise the target,” he said.
Reddy said the Mumbai airport handled 36.4 million passengers for year ended 31 March and is expected to cross 40 million this year. “We have plans to increase it to 50 (million),” he said, without revealing a time frame. He admitted GVK is waiting for raw-material linkages from the government to run the power plants. He said GVK’s Alaknanda power plant was commissioned last month.
Asked about selling partial stake in GVK’s Australian coal mine project, he said the time is not right as coal prices are low.
He said the company is looking at ways to reduce debt of around Rs.25,000 crore.
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