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Infrastructure Financial Services Limited
Milind Patel- Executive Director
IL&FS Financial Services Limited 30 Nov 2006

© IL&FS Ltd

L&FS-an introduction

orated in 1987 with mandates to commercialise infrastructure and develop financial services business

e years has developed both lines of business and each business is developed as separate profit centres

Successful Delivery of An Infrastructure Mandate on a PPP basis

Project Development Project Sponsorship Project Management Stakeholder Value Management Management & Technical Skills Project Design & Sector Specialization Engineering & Project Management Legal & Contractual Documentation Environmental & Social Management

Investment Banking Structured/Asset Finance Financial Engineering Skills Corporate Advisory/M&A Project Finance

Distribution Broking Project Syndication Merchant Banking

Private Equity Venture Funds Infrastructure Funds


© IL&FS Ltd

The Takeoff Stage 3 © IL&FS Ltd .INDIAN ECONOMY.

FY04 a ae o K r an h C i a dn i I d i s ya a M l na w aT i Industry •Services Agriculture e opagn S r i no K gno H nai ahT l en ppli hP i i a s enodn i I •Q1. FY04 •Q4.5 •-10.5 •5. FY04 •Q3.0 4.0 5.FY05 4 © IL&FS Ltd .0 •7. FY03 •Q2.2 5.0 •-7.1 2.8 4.0 •12.0 •2.0 3.5 •0.6 9 8 7 6 5 4 3 2 1 0 •YoY % change 6. FY03 •Q1.5 3.ndian Economy –A Snapshot Overview • • • • • • Indian economy – The 4th largest & 2nd fastest growing economy in the world India GDP for FY 2006 was appx USD 570 bn at constant prices 4th largest economy in the world in terms of purchasing power parity A middle class customer base of over 300 million people More than 7% GDP growth for four consecutive years Infrastructure a key bottleneck Trends in GDP •17.5 •-5. FY03 •Q2.6 4.8 •-2.5 •15. FY03 •Q3.2 •10.0 •Q1.5 10 year GDP growth CAGR % 10 8. FY04 •Q4.

manufacturing and global trade The infrastructure development has not kept pace with the growth in manufacturing and services sector leading to a bottleneck Huge Investment Requirement for physical infrastructure for power.nfrastructure Challenge INFRASTRUCTURE CAN BE A GROWTH CONSTRAINT • • • India Economic Growth triggered by economic reforms in 1991which led to a huge growth in services. Draft Maritime Policy. etc • Ring fencing of funds earmarked for infrastructure • Nomination of implementation authorities • Urgency to bring about commercial viability is apparent • Momentum of private participation picking up. roads. with innovative financing concepts like ‘Public Private Partnerships’ and ‘Viability Gap Funding’ 5 © IL&FS Ltd . ports. Draft Civil Aviation policy. airports and railways …INITIATIVES IN THE RIGHT DIRECTION • Strong political will and Improved policy environment: Electricity Act.

INDIAN AVIATION –Witnessing High Growth 6 © IL&FS Ltd .

domestic sectors primarily serving b) Air India. NEPC. Indigo Implication • Aviation has become affordable with check fares and discount schemes © IL&FS Ltd .Indian Aviation Industry. Modiluft.etc started service 1994: Private Carriers permitted to operate scheduled services Six operators granted license however only Jet and Air Sahara able to Implication •Aviation became a preferred mode of transport for elite class •Restricted Growth of Aviation Industry •High Cost structure •Underdevelopment of infrastructure 7 Players Consequently. Go Air. East West. assets of 9 existing companies transferred to two entities in the aviation sector controlled by the Government in a) Indian Airlines.Liberalisation 1953: Nationalization Industry of Aircraft 1986: Private Sector permitted as Air taxi operators Players including Jet. Spice Jet. primarily serving the international sectors service 2003: Entry of low cost carriers Air Deccan. Air Sahara.

High Level of potential demand with growth in Indian economy •Untapped Air Cargo Market .Total Passenger Traffic only 50 mn as on 31st Dec 2005 amounting to only 0. parking bays.02 trips per annum .Build up of capacity by existing players and entry of new players CONSTRAINTS •Infrastructure Constraints -Shortage of airport facilities.air traffic control facilities and takeoff and landing slots .Industry Characteristics HUGE POTENTIAL • Under penetrated Market .05 trips per annum as compared to developed Nations like United States have 2.Continued growth might be hampered •Relatively Limited Reach -Only 454 airports with less than 100 airports8 having more than one daily service © IL&FS Ltd .Air Cargo has not yet been fully taped in the Indian markets and is expected that in the coming years large no of players would have dedicated fleets • What this means… .

in million % Growth 17 12 19 17 23 18 Domestic million % Growth 49 12 59 22 74 24 2003-04 2004-05 2005-06 2010 (Projection): 105-115 million (69 mn domestic & 40 mn international) Air Cargo Trends YEAR International Q ty ( Thous tonnes ) % Growth Total Q ty ( Q ty ( Thous Thous tonnes ) % Growth tonnes ) % Growth Domes tic 2003-04 2004-05 2005-06 693 824 903 7 19 10 375 457 479 13 22 5 1069 1280 1382 9 20 8 2010 (Projection): million % Growth 32 11 40 24 51 28 Total Growth in Passenger and Air Cargo Traffic Passenger Traffic Trends YEAR International No.360 thousand tonnes Source: Ministry of Civil Aviation 9 © IL&FS Ltd .

Huge Plans Fleet Acquisition • • New Fleet Orders -More than 500 Fund Requirement.USD 50-55 bn approx Competitive Pressure COMPETITIVE LANDSCAPE Order Book – New Players Indigo Air India Air Deccan Kingfisher Indian Airlines Jet airways Go Air Spice Jet Air Cargo Market 43 40 36 20 100 68 ec vr eSll uF i 60 50 Low cost Carriers changing game Indig o the Expected to grow to 125 from 7 by 2025 10 Price © IL&FS Ltd .apacity Expansion and New Players Huge Growth.

AIRPORT Opportunity INFRASTRCUTURE-Huge 11 © IL&FS Ltd .

Regulatory Authorities Ministry of Civil Aviation Responsible for the formulation of policy. air traffic services and carriage of passengers and goods by air Other Attached/Autonomous Organisations: Directorate General of Civil Aviation (DGCA) safety oversight : Promote safe and efficient Air Transportation through regulation and proactive system : Regulatory authority for civil aviation security India : Accelerate the integrated development.port Infrastructure. development and regulation of Civil Aviation. and modernization of the operational. Its functions also extend to overseeing airport facilities. cargo facilities at the airports 12 Bureau of Civil Aviation Security in (BCAS) Airport Authority of India (AAI) expansion terminal and © IL&FS Ltd .

Abandoned and Disused Airports • Majority of Civil Airports managed by Airports Authority of India • AAI responsible for airport infrastructure development Current Status The increased passenger and cargo traffic has posed new challenges in the area of providing adequate infrastructure at airports AAI manages 127 airports which includes: • 13 International airports (excluding Delhi & Mumbai and including 3 civil enclaves) • 7 Custom airports • 28 Civil Enclaves • 80 Domestic airports • 2 Joint Venture Airports (Delhi & Mumbai) 13 Imperatives • • • • Expansion of capacity at existing airports Up gradation / modernization of Metro and Non-metro airports Development of new Greenfield Airports Induction of modern technology for efficient handling of Aircraft. This includes Operational. Passenger and Cargo at airports • Up gradation of CNS/ATM facilities © IL&FS Ltd .a Airport Infrastructure – Huge Growth Potential AAI manages Civil Airports There are 454 airports / airstrips in the Country. Non Operational.

beyond 74% requiring Government approval Foreign equity upto 40% and NRI/OCB investment upto100% is permissible in the domestic air transport services with prior GOI approval Domestic Carriers permitted to operate international flights Open Sky policy for cargo flights Attractive fiscal incentives/concessions.ecent Regulatory Initiatives STEPS HAVE BEEN TAKEN TO DEVELOP AIRPORT INFRASTRCTURE • • • • • • • • • • • Private investment encouraged –both in Airlines as well as Airports Airport Infrastructure Policy.1997 permits private equity participation for development of airports to bridge resource gap and to bring efficiency Foreign Direct Investment has been allowed upto 100% in airports. moderate tax rates & Tax holidays Public-Private Partnership encouraged Liberal Equipment Import regime Comprehensive Civil Aviation Policy to be finalized very shortly Airport Privatization -Delhi -Mumbai GMR-Fraport consortium GVK.South African Airports 14 © IL&FS Ltd .

AI.Plans for Airport Infrastructure Airport Authority –Expenditure Plans Source: Ministry of Civil Aviation IMPACT • Opens a huge market for companies operating in Aerospace and Allied Industries • Opportunity big for sophisticated and high end technology products like communication and security equipments • A large pie for foreign players as Indian players not equipped to cater to demand 15 Particu © IL&FS Ltd .

• Baggage Screening systems.sheet metal. training & consultancy • Outsourcing/offshoring development (offsetting) • Electronics/Avionics • Support services (sky-chefs) • Specialized Consulting (Traffic Study. surface engineering • Aerospace Software .Market Opportunity Opportunity Universe • Airport Operations • Cargo Facilities and Warehouses • Supply of components (to HAL. Business Advisory) design & • Navigational aids. • Flight information systems 16 • Baggage handling and information © IL&FS Ltd . others) • Raw material . forgings. • Multi-zone Door Frame Metal Detectors • Airfield lighting systems • Radar systems. • Simulators • Smart Cards systems. Products • Instrument landing systems (ILS) • Communications equipment • Weather equipment systems • Aerobridges • Centrifuge.Systems • MRO facilities & equipment • Simulation.

Market Size USD Millions Source: UK Trade and Investment Estimated that more than 50% of the above market will be catered by foreign players 17 © IL&FS Ltd .

CRM bases.try Strategies for Foreign Companies Level 1 Sell existing products and services into growing Indian market directly/indirectly (through OEM’s) Level 2 Formulate strategic alliances. support bases to sell into Indian market Level 3 Use maturing. sell into Indian and Global Market 18 © IL&FS Ltd . low cost Indian platform for Sourcing from India to sell into World Market Level 4 Setup JV’s in India to take advantage of the edge given to domestic firms.

Set up facility in India 19 © IL&FS Ltd .oduct Segments: Possible Strategies Electronics Components Sell into Indian market through distributors Airport Services & Development Be part of several consortiums to develop and manage Indian airports or form partnerships with existing consortiums in India Maintenance/Re pair/Overhaul Establish own MRO facilities or sell to the facilities that are going to be established Interior Funrshings No professional aircraft finisher in India. Immediate opportunity in India Ground Support Equipments Sell Ground Support Equipments by forming partnerships with Indian marketing arms to meet the Indian demand Training and Educational Institutions Huge demand for pilots and cabin crew.

reconstruction and development of airport infrastructure to implement infrastructure development plan • Provides a huge opportunity for private players operating in Aerospace and allied industries • Significant opportunity for foreign companies as Indian companies not technologically equipped to cater to requirements 20 © IL&FS Ltd .Summation • Indian Aviation has seen high growth on account of sustained Indian socio economic growth and liberalized Government initiatives • Airport Infrastructure needs to improve significantly to meet the current and future demand of the Indian Aviation Sector • Authorities have initiated various steps to implement modernization.

21 © IL&FS Ltd .

Growth Drivers DEMAND DRIVERS • GDP Growth has been more than 7% in the last 4 years • The rising middle class of more than 300 mn is fuelling the growth Affordability of Air travel • Government Liberal Policy to allow private carriers and entry of Low Cost Carriers has lead to a increase in demand in passenger traffic • Domestic Tourism and International Business Travel and Tourism has also greatly fuelled the rise of Indian aviation sector 2000 2001 2002 2003 2004 2005 Financial Year 0 HUGE POTENTIAL MARKET Indian Railways-Premium 60 Passengers 38 40 40 41 42 51.3 Million • The Increase in Consumerism and Passengers 20 Huge potential market • Discount Fares/Low Cost Carriers fares competitive to premium railway fares • Ever increasing reach 22 © IL&FS Ltd .3 52.

2 15 Mn Passengers 300 200 100 0 136 140 160 168 190 ) n M n ( XAP i 5 19 96 97 19 99 0 2 3 20 0 19 9 0 Year FY02 Financial Year FY03 FY04 FY05 • Domestic Tourism growth CAGR @ 15% • Boost with rising per capita income and increased consumerism • Foreign Tourist Arrivals growth @ 20% for 2004 and 2005 • International Air Traffic growing at CAGR @15% • Growing Indian economy and globalized trade • Rise in international tourism 23 20 0 20 04 8 19 9 20 0 1 5 20 0 19 © IL&FS Ltd .Growth Drivers International Air Passengers 20 18 400 370 220 236 270 309 Tourism 15 11.9 10 13.