Bengaluru airport eyes fund raise

By Saikat Das and Mihir Mishra

Kempegowda International Airport in Bengaluru is in advanced talks to raise about $1.1 billion by issuing local currency bonds, seeking to refinance an existing debt and fund expansion projects, according to people familiar with the matter. 

The airport operator, which is partially owned by Canada-based Fairfax Financial Holdings Ltd., is in discussions with a group of large investors including the State Bank of India, ICICI Bank Ltd. and Axis Bank Ltd., said the people, who asked not to be identified because the information is private.

The company, known locally as BIAL, runs India’s third largest airport in the city of Bengaluru. 

The tenor for the privately issued bonds could go up to 15 years, said the people. The initially proposed coupon is 8.15%, but it could be lower as negotiations continue, particularly after the Reserve Bank of India slashed the benchmark rate by 50 basis points, they said. Terms are not yet finalized. 

The fund-raising effort reflects India’s growing focus on building and upgrading airports, a priority for Prime Minister Narendra Modi as he looks to accelerate growth for one of the world’s fastest-developing economies. BIAL’s airport has capacity to handle 51.5 million passengers per year, according to a report by Crisil Ratings, the local arm of S&P Global Ratings.

Indian airports will incur a cumulative capital expenditure of over 600 billion rupees in the three years through fiscal 2027, up 12% from the amount spent during the three-year period between 2022 to 2024, according to Crisil Ratings.

The bonds would be unlisted, which is not very common in India as most primary bond sales are conducted through auctions on electronic bidding platforms on stock exchanges, the people said. Since the borrower is an unlisted company, it would find it cumbersome to meet certain parameters to list the bond in the exchange, said two of the people. 

BIAL declined to comment. Axis Bank, ICICI Bank and State Bank of India did not immediately reply to requests for comment. 

ICRA, the local arm of Moody’s Ratings, rated BIAL with a triple-A grade. “The rating considers the healthy improvement in scale of operations,” it said in a note.