AAI: Government Again Mulls Listing Airports Authority Of India

The government is again pursuing the proposal to list state-run Airports Authority of India that regulates air traffic and maintains 129 airports across the country, an official aware of the proposal told BloombergQuint.

AAI will first have to be corporatised and shares issued to the government before its listing on the bourses, the official said requesting anonymity.

The finance ministry has already asked AAI to issue shares worth Rs 656 crore, the capital it has received from the government over the years.

AAI is a government-owned statutory corporation—an autonomous corporate organisation established by a special Act of Parliament. AAI was constituted through the AAI Act, 1994.

According to Atul Pandey, partner at Khaitan & Co, a simple way to corporatise AAI would be to incorporate a company after obtaining necessary approvals, including name approval, and transfer all assets of AAI into such a company,

The company can then issue shares to the government, and will be state-owned, Pandey told BloombergQuint. This state-run entity could then be listed on the stock exchanges as per Securities and Exchange Board of India guidelines, he said.

The government has tried to corporatise and list AAI for several years. The Narendra Modi government, in 2015, informed the Parliament it would corporatise and subsequently list AAI to improve efficiency and transparency. But the plan didn’t go through.

What Does AAI Do?

AAI manages 23 international airports, nine customs airports, 77 domestic airports and 20 civil enclaves at defence airfields, according to information on its website. It also provides air navigation services over 2.8 million square nautical miles of airspace.

AAI, according to Crisil, has a robust financial risk profile, aided by strong capital structure and cash accrual due to healthy growth in traffic and non-traffic revenue. The rating agency expects AAI’s revenue growth to sustain at “healthy levels” over the medium term, backed by assured revenue from air traffic control activity, and lease revenue from Delhi International Airport Ltd. and Mumbai International Airport Ltd. ATC services, and lease revenue from MIAL and DIAL contributed 29 percent and 26 percent to AAI’s operating income in 2017-18, respectively, Crisil said.

The company’s revenue for the year ended March 2018 was Rs 12,977 crore—compared with Rs 12,542 crore in the previous year. Financials for 2018-19 aren’t available yet.

ICRA, however, sounded a word of caution in a recent note. “Any reduction in revenue share from privatised airports can impact AAI’s revenues and profitability significantly,” it said. The development of more airports—greenfield, under the regional connectivity-led UDAN scheme—and privatisation of existing airports can adversely impact its revenues and margins, it said.

The rating agency also pointed out AAI’s liquidity would be determined by the quantum of cash outflows towards dividend payouts, which have remained elevated over the last two years.

AAI paid Rs 3,003 crore as dividend in 2017-18 which included special dividend equal to 100 percent of profit for 2016-17, as against Rs 1,125 crore paid during 2016-17, according to its annual report.