From energy to project exports, GVK has its name on a growing bouquet of domestic and international projects. In an exclusive interaction with The Dollar Business, Krishna Ram Bhupal, Director, GVK Power and Infrastructure, talks about expansions, consolidations and the perennial benefit of investing in airport projects.

Andres M. Molier | February 2017 Issue | The Dollar Business

TDB: GVK, today, is a conglomerate with interests in energy, mining, infrastructure, biosciences and project exports. Are there any particular focus areas for the group?

Krishna Ram Bhupal (KRB): The global market is full of uncertainty, so we have decided to move with caution for the time being. We are very happy with all the sectors and are currently looking to consolidate the business. Having said that, the I Gusti Ngurah Rai International Airport in Bali (Indonesia) was a huge success for us. So, we had pitched in for the Yogyakarta Airport project in Indonesia. We have now signed a memorandum of understanding (MoU) to build the airport. We hope and believe it will also be a resounding success!

TDB: What is the progress on the new Yogyakarta Airport? Are you also bidding for other international airport projects?

KRB: We have already signed an MoU with PT Angkasa Pura I (Persero), which is a state-owned enterprise of Indonesia, for the development of a greenfield international airport in Yogyakarta Special Province, in central Java. We have also signed a management services agreement (MSA) with PT Angkasa Pura I (Persero) for commercial and operations development of I Gusti Ngurah Rai International Airport, in Bali. At the moment, it’s under the development stage, but the masterplan has been approved by the Ministry of Transportation and the Ministry has already allocated land to develop the new international airport.
Also, we have been selected as a partner for the KaulaNamu International Airport in North Sumatra. We will be working along with PT Angkasa Pura II (Persero), another state-owned enterprise of Indonesia. While GVK and PT Angkasa Pura II (Persero) are in talks, the details are yet to be finalised. Other than that, we are currently not looking at any other international airport project.

TDB: Why did you chose Indonesia for airport development projects when there are several other emerging markets in Africa and South America?

KRB: What attracted us to Indonesia in the first place was the size of its economy. The country [Indonesia] is currently being looked at as one of the largest economies in the region and its educated population is huge. Even the country’s demographic is evenly distributed. Besides, we had been looking at an overseas opportunity for a long time. And Indonesia is a fantastic place to invest.

If you compare India and Indonesia, both the economies are similar in terms of their young population and their rapid urbanisation. If you look at the Indonesian population, out of 400 million, the youth constitute nearly 250 million of the total  population. Even though the working system in every country is different, Bali was a great experience. The Indonesian government is very flexible and the ease of doing business that they offer is very encouraging. Their current President is very dynamic with a clear focus on developing infrastructure in the country. However, issues like dealing with unions can be a little challenging.

TDB: In the energy sector, your Goindwal Sahib Power Project has faced hurdles with respect to coal supplies. Where do things stand today? Are you also looking at alternatives other than fossil fuels?

KRB: Well, what happened was that the Supreme Court in a sweeping judgment deallocated all the coal mines including ours. We had worked hard to get the mine ready for supplying coal to our plants. This was a huge setback for us and delayed the commissioning of our Goindwal Sahib Power Project. However, since coal is readily available and is no longer an issue, we are focussing on commencing operations. I think by March 2017, we will be able  to revive it.
We are not planning on venturing into alternative sources as you can’t really scale solar and wind energy. With regular fossil fuel you can build a plant with a capacity of 400-500 MW. However, you can’t do the same with either wind or solar energy.
 
TDB: What is the business outlook for Mumbai and Bengaluru airports? Have you done anything lately to facilitate EXIM cargo growth from the airports?

KRB: Traffic, both passenger and cargo, in Mumbai and Bengaluru airports have grown over the last few years. For instance, in FY2016, the Bangalore International Airport Ltd. handled 18.97 million passengers and 2,91,920 metric tonne (MT) of cargo, which is an increase of 23.20% and 4.40% y-o-y, respectively. As for Mumbai Airport International Ltd. (MIAL), its aircraft handling capacity increased 10.01% y-o-y in FY2016. It handled 41.67 million passengers in the last fiscal against 36.63 million in FY2015, which is a 13.76% growth. We also witnessed a 6% growth in cargo traffic at Mumbai airport last fiscal. As for cargo facilities at these ports, in 2015, we built warehouses with state-of-the-art installations. What were earlier just sheds are now full-fledged cargo terminals. And in terms of expansion in Bangalore, work on the new terminal is about to start.
 
TDB: Can you please share how the company performed in FY2016. Also, could you share details about the turnover from Bali Ngurah Rai International Airport Indonesia?

KRB: In FY2016, the total income from operations was Rs.4,164.47 crore, which was an increase of 36.56% against FY2015, which closed at Rs.3,049.65 crore. The power and transportation segments contributed Rs.963.87 crore and Rs.358.47 crore respectively, compared to Rs.290.40 crore and Rs.299.83 crore in FY2015. As for airports, the turnover in FY2016 was Rs.2,839.18 crore against Rs.2,454.79 crore in FY2015. So, there has been growth.

As far as Bali Ngurah Rai International Airport, Indonesia, is concerned the turnover was Rs.121.58 crore as against  Rs.78.21 crore for the previous year, recording an increase of 55.45%.

TDB: What makes investment in airports more lucrative compared to other infrastructure projects?

KRB: If anybody is looking to invest in airports, I think they must go ahead with it. Airports, throughout the world, give you steady revenue from day one because they are purely monopoly assets. I feel that Europe is a great destination at the moment, so are emerging markets like those in the African continent.