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GVK Power + Bangalore Airport Deal – Analysis

November 6, 2009

GVKPIL announced that its board approved acquisition of a 12% stake in Bangalore International Airport Ltd for consideration of ~Rs4.846bn from Flughafen Zuerich AG. GVK intends to fund the acquisition via debt. The company has also recently raised ~$150mn through the QIP route.

Bangalore airport is the 4th largest airport in India in terms of passenger traffic handled – it handled 9.2mn passengers in 2008. The airport is spread over 4,000 acres of land; with 215 acres of land earmarked for commercial development. GVK is interested in piece of this land and may offer L&T to BUY OUT form the venture.

While we do not have details of the financial performance of the company, GVK did mention that it expects the company to post a profit of Rs300-400mn in FY10E

Zurich Airport has exited at 8X its cost of investment in less than there years. In our view, substantial upside of the project development has been captured by Zurich airport rather than GVK.

GVKPIL is expected to report an EPS of Rs 0.90 to Rs 1.0 for FY10 and between 1.10 to 1.50 for FY11. Stock at Rs 50 appears to be fully pricing in the recent development.

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