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INFRA FINANCE UPDATE, OCTOBER 2021

The Tata Group will take over state-owned Air India, marking a successful end to the government’s bid to privatise the national carrier after having failed to sell a majority stake in it in 2018. Tata will pay Rs 18,000 crore to acquire Air India from the government — of the total money, 15% would go to the government and the rest will go in clearing debt. Air India’s total debt stands at Rs 43,000 crore, an increase of about Rs 20,000 crore in the past two years due to the effects of Covid on the industry. The government plans to absorb this portion and transfer the airline to the new owners with a debt of Rs 23,000 crore–a large part of it will be retired with the bid money.

Market concentration in the Indian aviation industry will rise as a consequence of Air India privatization, putting it higher than in telecom. Based on the revenues of FY20, the Tatas, with their three airlines, and IndiGo Airlines will control nearly 80 per cent of those. It will be 81 per cent based on the revenues of FY21. Besides Air India, Tata Sons owns a majority stake in Tata SIA Airlines, which operates Air Vistara, and AirAsia India. In comparison, Reliance Jio and Bharti Airtel together had a 67 per cent revenue share in telecom in FY21.

Adani Thiruvananthapuram International Airport Ltd (ATIAL), a wholly-owned subsidiary of Adani Enterprises Ltd, will now operate, manage and develop the airport for a period of 50 years under a concession agreement signed with the Thiruvananthapuram International Airport (AAI). The Adani Group, which is constructing the Rs 7,525 crore Vizhinjam international seaport in Thiruvananthapuram district, had won the competitive bidding process for the 89-year-old airport held in February 2019. Adani Enterprises Ltd had quoted Rs 168 as the per-passenger fee payable to the AAI.

In the sector of roads and highways, National Highways Authority of India (NHAI) launch its maiden Infrastructure Investment Trust (InvIT), with which it aims to mop up Rs 5100 crore, as part of the government’s long-term plans to monetise road assets. The road assets which will be brought under the InvIT has an enterprise value of Rs8000 crore, where debt will be Rs2000 crore. NHIT InvIT will hold the five toll road assets of 390 km, spread across Rajasthan, Gujarat, Telengana and Karnataka. The assets have an estimated revenue of Rs500 crore in FY22. Three top Canadian pension funds, including Caisse de dépôt et placement du Québec (CDPQ), and leading local insurers such as Life Insurance Corp and HDFC Life are among the frontline investors likely to buy into the infrastructure investment trust (InvIT) of the National Highways Authority of India (NHAI). Other likely investors are the Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers’ Pension Plan (OTTP), besides India’s ICICI Prudential Life Insurance.

IRB Infrastructure Developers Ltd would raise as much as Rs 5,347 crore from Spanish infrastructure group Ferrovial SA and Singapore’s sovereign wealth fund GIC, in the largest equity fundraising by an Indian roads developer. Ferrovial’s subsidiary Cintra Global SE will invest up to Rs 3,180 crore for a 24.9% stake in IRB Infrastructure, while GIC will invest up to Rs 2,167 crore for a 16.9% stake.

Shares of H G Infra Engineering surged 15 per cent to Rs 819.55 on the intraday trade after the company received Letter of Award (LoA) from National Highways Authority of India (NHAI) for the projects worth of Rs 2,297 crore. The stock of construction & engineering company surpassed its previous high of Rs 784.30 recorded on October 18, 2021. The first project is for the development of six lanes Kaliagura-Baunsaguar section of NH- 130-CD road under Raipur- Visakhapatnam Economics Corridor (Package — OD-5). The company put a bid cost of Rs 1,338.27 crore. The second project is for the development of six lanes Baunsaguar-Baraja section of NH- 130-CD road under Raipur- Visakhapatnam Economics Corridor (Package — OD-6). The company put a bid cost of Rs 958.98 crore. Both the projects are on Hybrid Annuity Mode (HAM) in the state of Odisha with a completion period of 730 days.

Prime Minister Narendra Modi launched Rs 100 lakh crore national master plan for multi-modal connectivity that aims to develop infrastructure to reduce logistic costs and boost the economy. The plan aims to lend more power and speed to projects by connecting all concerned departments on one platform, adding the infrastructure schemes of various ministries and state governments will be designed and executed with a common vision. Gati Shakti joins different departments for the coordinated development of projects from road to railways, aviation to agriculture.

India bulls Real Estate Ltd’s (IBREL) sales bookings jumped over two-fold to Rs 874 crore during the first six months of this fiscal year on revival of housing demand. According to an investor’s presentation, new sales stood at Rs 874 crore in the first half of this fiscal year from Rs 368 crore in the corresponding period of the previous year. The gross collection also rose to Rs 654 crore during April-September period from Rs 284 crore in the year-ago period.

Picture courtesy: Simon Coates/Flickr

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