MARCH 20248TOP STORIESINDIA'S AVIATION BOOM CAN SUPPORT ANOTHER INTERNATIONAL HUB: AIR INDIA CEOIndia's airline industry is experiencing rapid growth, leading to speculation by Campbell Wilson, CEO of Air India Ltd., that the country could support at least one additional international hub apart from Mumbai and Delhi.Wilson stated, "India can be home to at least three hubs and plenty of point-to-point services," emphasizing the unique flow patterns within India and its strategic geographical location.With a burgeoning consumer class and robust economic expansion, India is poised to become one of the world's largest travel markets. The country's leading carrier, IndiGo, and emerging airline Akasa, along with other airlines, have collectively ordered over 1,100 aircraft, with investments exceeding $12 billion allocated for the construction of more than 72 new airports by 2025.Air India, in particular, has witnessed significant fleet expansion, with the delivery of one new aircraft every six days over the past six months. The airline is set to continue this trend over the next year, receiving a considerable number of new Boeing 777s, Airbus A350s, and Boeing 737 Maxs.Wilson highlighted the historical underserving of the Indian market, noting that at the time of privatization, Air India had only 43 wide-body aircraft compared to significantly higher numbers in other markets like Singapore and Dubai.As part of the Tata Group's efforts to revitalize Air India, plans are underway to merge low-cost carriers Air India Express and AIX Connect into a single entity and to combine Air India and Vistara into another. The merger between Air India and Vistara has received approval from the Competition and Consumer Commission of Singapore, signaling progress in the restructuring efforts. HINDUJA GROUP SEEKING CAPITAL FROM JAPANESE BANKS FOR ACQUISITION ASSISTANCEIndusInd International Holdings Limited (IIHL), a Hinduja group company, is seeking to raise up to 8,000 crore from Japanese banks to finance its bid for Reliance Capital, formerly owned by Anil Ambani. The move comes ahead of the May 27 deadline set by a bankruptcy court to finalize the deal. IIHL's approach to Japanese banks is seen as a strategic move to secure financing at potentially lower interest rates, leveraging Reliance Capital's association with Nippon Life, a joint venture partner.The discussions with Japanese banks, including Mizuho, SMBC, and MUFG, center around securing five-year loans at an interest cost of 8-9 percent per annum. This would represent a significant reduction in interest rates compared to other lenders, potentially providing cost-effective financing for the acquisition. However, the funding arrangements are yet to be finalized.The Hinduja group had previously explored raising $1 billion from global private credit funds, but the interest rates offered by those sources were relatively high, at 15-16 percent per annum. By tapping into Japanese banks, IIHL aims to secure more favorable terms for financing the acquisition of Reliance Capital.While IIHL may raise a significant portion of the required funds through this new financing route, the Hinduja family may need to inject additional equity to bridge any funding gap. The Hinduja group did not respond to queries regarding the matter, while Mizuho's executives were unavailable for comment, and MUFG and SMBC declined to comment.Japanese financiers have been increasingly active in India, demonstrating a greater appetite for risk and providing funding for local businesses. Japanese banks have previously financed Indian corporates with foreign currency loan requirements, but their involvement in local financing has been expanding. Recent investments by Mizuho, MUFG, and SMBC in their Indian operations highlight their commitment to the Indian market and their willingness to provide substantial funding to support business activities.
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