Gulf-based businessman Yusuffali M A will acquire a substantial stake in the Kannur International Airport Ltd (KIAL), which is building Kerala’s fourth international airport in the northern city of Kannur.

Together with the Federal Bank, in which he holds a 4.47% stake, the founder of the $5.1bn LuLu Group will be allotted 5% shares.

Yusuffali is also the single largest individual shareholder and one of the directors of the Cochin International Airport Ltd (CIAL), which runs India’s first corporate airport in the southern Indian state.

He also holds stake in other Kerala-based banks, Catholic Syrian Bank and Dhanalakshmi Bank, besides running India’s largest retail and leisure mall under his flagship LuLu brand in the port city of Kochi.

KIAL has also decided to offer another 5% to retail investors living abroad. However, response so far has been lukewarm unlike the case of CIAL which has more than 10,000 investors from 30 countries.

Though the project received the federal clearance in 2008, it was delayed due to opposition to individual investors seeking bulk shares.

The total number of shares in KIAL is 36,624,204 and total paid-up capital received so far is Rs2.3bn.

Defence minister A K Antony will formally flag off the its runway’s construction tomorrow.

Engineering and construction major Larsen & Toubro has already started work on the runway, taxiway, apron and other related infrastructure.

“Of the 16% shares earmarked for the public, 6% have been sold out while Yusuffali and the Federal Bank together were ready to subscribe 5%. The remaining 5% will be offered to the diaspora,” said K Babu, the southern state’s aviation minister who is also one of its directors.

The state government holds 35% stake in the firm converting its landholding into equity while Bharat Petroleum Corporation Ltd (BPCL) and other public sector entities have subscribed to 23% stake.

The Airport Authority of India has decided to acquire 26% stake which will be announced by K C Venugopal, India’s junior aviation minister, at the inaugural ceremony to be presided over by Oommen Chandy, the state’s chief minister.

The outlay for the first phase is estimated at Rs15.9bn while the authorised equity capital is Rs10bn.

The cost of land, converted into equity, was fixed at Rs2.94bn. The remaining part will be raised through debt. “We intend to achieve financial closure by the end of March,” the minister said.

“We need to take a loan of Rs9bn this year and the banks have offered cash at an interest rate of 10.5%. We are weighing the options”.

Work on the passenger terminal, air traffic control tower and administrative block will begin in April-May and completed the next year.

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