Adani offers Temasek ticket out of Air India mess
RPT-BREAKINGVIEWS-Adani offers Temasek ticket out of Air India mess The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Shritama Bose
MUMBAI, Sept 10 (Reuters Breakingviews) - Temasek has found a more desirable flight path in India. The Singaporean sovereign investor will join BlackRock BLK.N and others in a $1 billion fundraise by the airports unit of Gautam Adani's flagship infrastructure incubator, Adani Enterprises ADEL.NS. For the city state, it also creates a hedge against its controversial exposure to Air India, the Tata group's struggling airline business.
Globally, airports are a safer way to invest in aviation. India is no exception. Carriers' earnings are volatile due to swings in fuel prices. New Delhi's frequent mandates to cap airfares do not help. Airport operators are usually spared such orders.
As the operator of eight airports including two in Mumbai and its suburbs, revenue at Adani Airports grew 34% last year. It handles 23% of India's passenger traffic and close to one-third of its air cargo. Selling everything from fragrances to booze to passengers at its terminals, it generates close to half of its top line from non-aeronautical streams, well over the global average of 37%.
The deal for about 5% of Adani Airport Holdings, which could have its own listing as soon as next year, looks attractively priced. It values the unit at $18 billion and its enterprise including debt at 36 times its EBITDA for the year ended March 31, per Breakingviews calculations. Delhi airport operator GMR GMRI.NS commands a multiple of 24 times.
Proceeds will help Adani expand its terminals and develop urban hubs surrounding them, with a goal to double annual passenger count to 200 million. Overseas too, Adani has ambitious plans and is bidding for Sicily's main airport. The tycoon is also looking to pick up minority investments in regional Indian airlines to support their growth which would, in turn, turbocharge footfall through its smaller airports.
All that still looks more straightforward than Temasek's exposure to India via its majority stake in $17 billion Singapore Airlines SIAL.SI, which owns a hefty 25% share of lossmaking Air India. It's seeking a $1.5 billion capital lifeline from its owners which is only slightly more than the latest reported carrying value of Singapore Airlines' stake.
Singapore Airlines only owns an interest in the Indian carrier because Vistara, its earlier joint venture with Tata, was rolled into Air India in 2024 after it was privatised. But if it continues to fund a company that will take a decade to turn around, it should demand increased influence over Air India's board.
Backing Adani's airport operator, which has a cleaner balance sheet and a clearer path to exit, ought to help to offset some headwinds.
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CONTEXT NEWS
Adani Airport Holdings on September 9 said it has entered into binding agreements to raise 98.25 billion rupees ($1.03 billion) of equity capital from a consortium of investors comprising Temasek, Alpha Wave Global, Premji Invest and funds managed by BlackRock. The transaction will give the group a combined 5.54% stake.
The investment reflects Temasek's conviction in India’s aviation infrastructure sector, underpinned by growing demand for air travel, expanding air connectivity, and continued development of airport capacity, a spokesperson for the Singaporean investor said. They added that India is Temasek's best-performing market over the past decade.
Temasek-backed Singapore Airlines is expected to seek greater influence over management and stronger governance rights before approving a capital injection into Air India, Reuters reported on the same day, citing two unnamed people familiar with the matter. The proposed conditions, which would be negotiated with Air India's majority owner Tata Sons, could include greater board voting power and requirements for the Indian carrier to narrow its losses, the report added.
(Editing by Una Galani; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on BOSE/shritama.bose@thomsonreuters.com))