- 1. AEROSAPCE INFRASTRUCTURE -An Opportunity Mapping
Infrastructure Financial Services LimitedMilind Patel- Executive
Director IL&FS Financial Services Limited FICCI-INDO US SUMMIT
30 Nov 2006
2. Project Development Project Sponsorship Project Management
Stakeholder ValueManagement Investment Banking Structured/Asset
Finance Corporate Advisory/M&A Project Finance Private Equity
Venture Funds Infrastructure Funds Distribution Broking Project
Syndication Merchant Banking Successful Delivery of An
Infrastructure Mandate on a PPP basis Engineering & Project
Management Legal & Contractual Documentation Environmental
& Social Management Project Design & Sector Specialization
Management & Technical Skills Financial Engineering Skills
IL&FS-an introduction
- Incorporated in 1987 with mandates to commercialise
infrastructure and develop financial services business
- Over the years has developed both lines of business and each
business is developed as separate profit centres
3. 4. INDIAN ECONOMY- The Takeoff Stage 5.
- 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
Indian Economy A Snapshot 10 year GDP growth CAGR% 8.6 6.2 5.0
5.0 4.8 4.6 4.2 3.5 3.1 2.8 0 1 2 3 4 5 6 7 8 9 10 China Malaysia
India Singapore Korea Taiwan Hong Kong Philippines Indonesia
Thailand
Industry
Agriculture Trends in GDP 6.
- INITIATIVES IN THE RIGHT DIRECTION
- Strong political will and Improved policy environment:
Electricity Act, Draft Maritime Policy, Draft Civil Aviation
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, with innovative
financing concepts like Public Private Partnerships and Viability
Gap Funding
Infrastructure Challenge
- INFRASTRUCTURE CAN BE A GROWTH CONSTRAINT
- India Economic Growth triggered by economic reforms in
1991which led to a huge growthin services, manufacturing andglobal
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 infrastructurefor
power, roads, ports, airports and railways
7. INDIAN AVIATION Witnessing High Growth 8. Indian Aviation
Industry- Liberalisation
- 1953:Nationalization of Aircraft Industry
- Consequently, assets of 9 existing companies transferred to two
entities in the aviation sector controlled by the Government
in
- Indian Airlines, primarily serving domestic sectors
- Air India, primarily serving theinternational sectors
- Aviation became a preferred mode of transport for elite
class
- Restricted Growth of Aviation Industry
- Underdevelopment of infrastructure
- 1986: Private Sector Players permitted as Air
- Players including Jet, Air Sahara, NEPC,
- East West, Modiluft,etc started service
- 1994: Private Carriers permitted to operate
- Six operators granted license however
- only Jet and Air Sahara able to service
- 2003:Entry of low cost carriers
- Air Deccan, Spice Jet, Go Air, Indigo
- Aviation has become affordable with check fares and discount
schemes
- Various Operators with different business model
- Huge growth foreseen in the Aviation Industry
9. Industry Characteristics
- -Total Passenger Traffic only 50 mn as on 31 stDec 2005
amounting to only 0.05 trips per annum as compared to
- developed Nations like United States have 2.02 trips per
annum
- -High Level of potential demand with growth in Indian
economy
- Untapped Air Cargo Market
- -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
- -Build up of capacity by existing players and entry of
newplayers
- Infrastructure Constraints
- Shortage of airport facilities, parking bays,air traffic
control facilities and takeoff and landing slots
- - Continued growth might be hampered
- Only 454 airports with less than 100 airports having more than
one daily service
10. High Growth in Passenger and Air Cargo Traffic Source:
Ministry of Civil AviationPassenger Traffic Trends Air Cargo Trends
2010 (Projection ) :105-115 million (69 mn domestic &40 mn
international) 2010 (Projection ) :3,360 thousand tonnes 11.
- New Fleet Orders -More than 500
- Fund Requirement- USD 50-55 bn approx
- Expected to grow to 125 from 7 by 2025
COMPETITIVE LANDSCAPE Capacity Expansion and New Players Air
Cargo Market Competitive Pressure Full Service Price Low cost
Carriers changing the game Indigo 12. AIRPORT INFRASTRCUTURE-Huge
Opportunity 13. Ministry of Civil Aviation Responsible for the
formulation of policy, developmentand regulation of Civil Aviation.
Its functions alsoextend to overseeing airport facilities, air
traffic services and carriage of passengers and goods by air
Airport Infrastructure-Regulatory Authorities Other
Attached/Autonomous Organisations:Directorate General of Civil
Aviation: Promote safe and efficient Air Transportation(DGCA)
through regulation and proactive safety oversightsystem Bureau of
Civil Aviation Security : Regulatory authority for civil aviation
security in(BCAS) India Airport Authority of India (AAI) :
Accelerate the integrated development, expansionand modernization
of the operational, terminal andcargo facilities at the airports
14. India Airport Infrastructure Huge Growth Potential
- AAI manages 127airports which includes:
- 13 International airports (excluding Delhi & Mumbai and
including 3 civil enclaves)
- 2 Joint Venture Airports (Delhi & Mumbai)
- AAI manages Civil Airports
- There are 454 airports / airstrips in the Country. This
includes Operational, Non Operational, Abandoned and Disused
Airports
- Majority of Civil Airports managed by Airports Authority of
India
- AAI responsible for airport infrastructure development
- The increased passenger and cargo traffic has
- posed new challenges in the area of providing
- adequate infrastructure at airports
- 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, Passenger and Cargo at airports
- Up gradation of CNS/ATM facilities
15.
- 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, 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, moderate tax rates
& Tax holidays
- Public-Private Partnership encouraged
- Liberal Equipment Import regime
- Comprehensive Civil Aviation Policy to be finalized very
shortly
- -DelhiGMR-Fraport consortium
- -MumbaiGVK- South African Airports
Recent Regulatory Initiatives 16. AAI- Plans for Airport
InfrastructureAirport Authority Expenditure Plans Source: Ministry
of Civil Aviation
- 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
17.
- Cargo Facilities and Warehouses
- Supply of components (to HAL, others)
- Raw material - sheet metal, forgings, surface engineering
- Aerospace Software - Systems
- MRO facilities & equipment
- Simulation, training & consultancy
- Outsourcing/offshoring design & development
(offsetting)
- Support services (sky-chefs)
- Specialized Consulting (Traffic Study, Business Advisory)
- Instrument landing systems (ILS)
- Baggage handling and information systems
- Baggage Screening systems,
- Multi-zone Door Frame Metal Detectors
- Airfield lighting systems
- Flight information systems
Products Market Opportunity 18. USD Millions Market Size
Estimated that more than 50% of the above market will be catered by
foreign players Source: UK Trade and Investment 19. Sellexisting
products and services into growing Indian market
directly/indirectly (through OEMs) Level 1 Level 2 Level 3 Level 4
Formulate strategic alliances, CRM bases, supportbases to sell into
Indian market Use maturing, low cost Indian platform for Sourcing
from India to sell into World Market Setup JVs in India to take
advantage of the edge given to domestic firms, sell into Indian and
Global Market Entry Strategies for Foreign Companies 20. Sell into
Indian market through distributors Huge demand for pilots and cabin
crew. Set up facility in India Electronics Components Airport
Services & Development Maintenance/Repair/Overhaul Interior
Funrshings Ground Support Equipments Training and Educational
Institutions Be part of several consortiums to develop and manage
Indian airports or form partnerships with existing consortiums in
India Establish own MRO facilities or sell to the facilities that
are going to be establishedSell Ground Support Equipments by
forming partnerships with Indian marketing arms to meet the Indian
demand No professional aircraft finisher in India. Immediate
opportunity in India Product Segments: Possible Strategies 21.
Summation
- Indian Aviation has seen high growth on account of sustained
Indian socio economic growth and liberalized Government
initiatives
- Airport Infrastructure needs to improve significantlyto meet
the current and future demand of the Indian Aviation Sector
- Authorities have initiated various stepsto implement
modernization, 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
22. THANK YOU 23.
- Discount Fares/Low Cost Carriers fares competitive to premium
railway fares
Indian Railways-Premium Passengers Growth 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
- The Increase in Consumerism and 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
38 40 41 42 51.3 52.3 0 20 40 60 2000 2001 2002 2003 2004 2005
Financial Year MillionPassengers 24.
- International Air Traffic growing at CAGR @15%
- Growing Indianeconomy and globalized trade
- Rise in international tourism
International Air Passengers
- Domestic Tourism growth CAGR @ 15%
- Boost with rising per capita income and increased
consumerism
- Foreign Tourist Arrivals growth @ 20% for 2004 and 2005
Growth Drivers PAX( in Mn) 11.9 13.2 15 18 0 5 10 15 20 FY02
FY03 FY04 FY05 Financial Year 136 140 160 168 190 220 236 270 309
370 0 100 200 300 400 1995 1996 1997 1998 1999 2000 2001 2002 2003
2004 Year Mn Passengers
