GVK Power & Infrastructure Ltd has entered into an agreement with the Fairfax Group entities to divest 33 per cent stake in Bangalore International Airport Limited (BIAL) for Rs 2,149 crore.
The transaction, subject to customary closing conditions and third party consents, including lender consents, is expected to be completed by the middle of 2016.
Upon completion of this transaction, GVK Power & Infrastructure’s debt burden, which stands at Rs 40,000 crore will be reduced by Rs. 2,000 crore.
This move will also help the company to save on interest to the tune of Rs. 300 crore per annum, it said.
The Fairfax entities that are buying the stake include the wholly-owned Mauritius based subsidiaries of Fairfax India Holdings Corporation and Fairfax Financial Holdings Limited.
For over a year GVK Airport Developers, the wholly-owned subsidiary of GVK Power & Infrastructure has been looking at mobilising funds to meet its debt obligations. Among other options, it is also considering a listing to raise funds.
GVK said it received multiple offers, from which the Fairfax Group was selected.
“All proceeds from this stake sale shall be used to bring down our debt obligations to our lenders,” Dr. GVK Reddy, founder Chairman and Managing Director, GVK said in a statement.
“We chose Fairfax as a partner in BIAL as we have a long standing relationship with its Chairman, Mr. Prem Watsa and we look forward to partnering with them in developing Kempegowda International Airport through its next stage of expansion as we develop a new world-class Terminal 2 and a new runway,” he added.
After the sale, GVK’s holding in BIAL will reduce to 10 per cent from the current 43 per cent. GVK, which heads the consortium that runs the Mumbai International Airport, had first acquired 17 per cent stake in BIAL from L&T for Rs 686 crore in 2009 and then gradually increased its stake.
Commenting on the development, Prem Watsa, Chairman and CEO of Fairfax said, “We will work closely with all stakeholders to manage our stake in BIAL, going forward, and will support G.V. Sanjay Reddy to continue to lead the management team as Managing Director (MD) of BIAL and Dr. G.V.K. Reddy will continue as Co-Chairman of BIAL.”
GVK said it would remain a long-term investor in airport assets in India.
