8/3/2019 12312007

1/24

IL&FS Ltd.1

AEROSAPCE INFRASTRUCTURE

-An Opportunity Mapping

Infras

tructure Financial Services LimitedMilind Patel- Executive Director

IL&FS Financial Services Limited

FICCI- INDO US SUMMIT

30 Nov 2006

8/3/2019 12312007

2/24

IL&FS Ltd.2

Project Development

Project SponsorshipProject 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 ManagementLegal & Contractual

Documentation

Environmental&

SocialManagement

Project Design&

SectorSpecialization

Management &Technical Skills

FinancialEngineering Skills

IL&FS-an introduction

In

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

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

8/3/2019 12312007

3/24

IL&FS Ltd.3

8/3/2019 12312007

4/24

IL&FS Ltd.4

INDIAN ECONOMY- The Takeoff Stage

8/3/2019 12312007

5/24

IL&FS Ltd.5

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 purchasingpower 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 4.64.2

3.53.1

2.8

0

1

23

4

5

6

7

8

9

10

China

Ma

lays

ia

India

Singapore

Korea

Ta

iwan

Hong

Kong

Philipp

ines

Indones

ia

Tha

ilan

d

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

Q1

,FY03

Q2

,FY03

Q3

,FY03

Q4,

FY03

Q1

,FY04

Q2

,FY04

Q3

,FY04

Q4,

FY04

Q1

,FY05

Yo

Y%

change

Industry Services Agriculture

Trends in GDP

8/3/2019 12312007

6/24

IL&FS Ltd.6

INITIATIVES IN THE RIGHT DIRECTION

Strong political will and Improved policy environment: ElectricityAct, 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 growth in

services, 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, roads, ports, airports and

railways

8/3/2019 12312007

7/24

IL&FS Ltd.7

INDIAN AVIATION Witnessing High Growth

8/3/2019 12312007

8/24

IL&FS Ltd.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

a) Indian Airlines, primarily serving domestic

sectors

b)Air India, primarily serving the

international sectors

Implication

Aviation became a preferred mode of transport

for elite class

Restricted Growth ofAviation Industry

High Cost structure

Underdevelopment of infrastructure

1986: Private Sector Players permitted as Air

taxi operators

Players including Jet,Air Sahara, NEPC,

East West, Modiluft,etc started service

1994: Private Carriers permitted to operate

scheduled services

Six operators granted license however

only Jet andAir Sahara able to service

2003: Entry of low cost carriers

Air Deccan, Spice Jet, GoAir, Indigo

Implication

Aviation has become affordable with check

fares and discount schemes

Various Operators with different business

model

Huge growth foreseen in the Aviation

Industry

8/3/2019 12312007

9/24

IL&FS Ltd.9

Industry Characteristics

HUGE POTENTIAL

Under penetrated Market

- Total PassengerTraffic only 50 mn as on 31st Dec 2005 amounting to only 0.05 trips per annum as compared to

developedNations like United States have 2.02 trips per annum

- High Level of potential demand with growth in Indian economy

UntappedAir Cargo Market

- Air Cargo has not yet been fully taped in the Indian marketsand is expected that in the coming years

large no of players would have dedicated fleets

What this means

- Build up of capacityby existing players and entry of new players

CONSTRAINTS

Infrastructure Constraints

-Shortage of airport facilities, parking bays,air traffic control facilities and takeoff and landing slots

- Continued growth might be hampered

Relatively Limited Reach

-Only 454 airports with less than 100 airports having more than one daily service

8/3/2019 12312007

10/24

IL&FS Ltd.10

YEAR

No.in

million % Growth

No.in

million % Growth

No.in

million % Growth

2003-04 17 12 32 11 49 12

2004-05 19 17 40 24 59 22

2005-06 23 18 51 28 74 24

International Domestic Total

High Growth in Passenger and Air Cargo Traffic

Source: Ministry of CivilAviation

Passenger Traffic Trends

Air Cargo Trends

YEAR

Qty ( Thous

tonnes) % Growth

Qty ( Thous

tonnes) % Growth

Qty (

Thous

tonnes) % Growth

2003-04 693 7 375 13 1069 9

2004-05 824 19 457 22 1280 20

2005-06 903 10 479 5 1382 8

International Domestic Total

2010 (Projection): 105-115 million (69 mn domestic & 40 mn international)

2010 (Projection): 3,360 thousand tonnes

8/3/2019 12312007

11/24

IL&FS Ltd.11

Huge Growth- Huge Plans

Fleet Acquisition

New Fleet Orders -More than 500

Fund Requirement- USD 50-55 bn approx

Order Book New Players

Indigo 100

Air India 68

Air Deccan 60

Kingfisher 50

IndianAirlines 43

Jet airways 40

GoAir 36

Spice Jet 20

Expected to grow to 125 from 7 by 2025

Competitive Pressure

Fu

llS

erv

ice

Price

Low cost Carriers

changing the game

Indigo

COMPETITIVE LANDSCAPE

Capacity Expansion and New Players

Air Cargo Market

8/3/2019 12312007

12/24

IL&FS Ltd.12

AIRPORT INFRASTRCUTURE-Huge Opportunity

8/3/2019 12312007

13/24

IL&FS Ltd.13

Ministry of Civil Aviation

Responsible for the formulation of policy, development and regulation of CivilAviation. Its functionsalso extend 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 oversight

system

Bureau of Civil Aviation Security : Regulatory authority for civil aviation security in

(BCAS) India

Airport Authority of India (AAI) : Accelerate the integrated development, expansion

and modernization of the operational, terminal and

cargo facilities at the airports

8/3/2019 12312007

14/24

IL&FS Ltd.14

India Airport Infrastructure Huge Growth Potential

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 VentureAirports (Delhi & Mumbai)

AAI manages Civil Airports

There are 454 airports / airstrips in the Country. This

includes Operational, Non Operational,Abandoned

and DisusedAirports

Majority of CivilAirports managed byAirports

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

Imperatives

Expansion of capacity at existing airports

Up gradation / modernization ofMetro and

Non-metro airports

Development of new GreenfieldAirports

Induction of modern technology for efficient

handling ofAircraft, Passenger and Cargo at

airports

Up gradation of CNS/ATM facilities

8/3/2019 12312007

15/24

IL&FS Ltd.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

Airport Privatization

-Delhi GMR-Fraport consortium

-Mumbai GVK- South African Airports

Recent Regulatory Initiatives

8/3/2019 12312007

16/24

IL&FS Ltd.16

9,302Market Opportunity by 2010

698Other than above airportsModernization/ Improvement

1,62835 selected airportsUpgradation

2,326Bangalore, Hyderabad, Pakyong,-Sikkim, Cheithu-

Nagaland, Itanagar, Goa, Pune, Nagpur (Hub),Navi

Mumbai, Halwara-Punjab

Green Field Airports

1,163Chennai & Kolkatta

3,488Delhi & MumbaiRestructuring/ Modernization

Cost ( USD Mn)AirportParticulars

9,302Market Opportunity by 2010

698Other than above airportsModernization/ Improvement

1,62835 selected airportsUpgradation

2,326Bangalore, Hyderabad, Pakyong,-Sikkim, Cheithu-

Nagaland, Itanagar, Goa, Pune, Nagpur (Hub),Navi

Mumbai, Halwara-Punjab

Green Field Airports

1,163Chennai & Kolkatta

3,488Delhi & MumbaiRestructuring/ Modernization

Cost ( USD Mn)AirportParticulars

AAI- Plans for Airport Infrastructure

Airport Authority Expenditure Plans

Source: Ministry of CivilAviation

IMPACT

Opens a huge market for companies operating inAerospace andAllied 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

8/3/2019 12312007

17/24

IL&FS Ltd.17

Opportunity Universe

Airport Operations

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)

Electronics/Avionics

Support services (sky-chefs)

Specialized Consulting (Traffic Study,

BusinessAdvisory)

Navigational aids, Instrument landing systems (ILS)

Communications equipment

Weather equipment

Baggage handling and information systems

Aerobridges Centrifuge,

Simulators

Smart Cards systems,

Baggage Screening systems,

Multi-zone Door Frame Metal Detectors Airfield lighting systems

Radar systems,

Flight information systems

Products

Market Opportunity

8/3/2019 12312007

18/24

IL&FS Ltd.18

Segment 2,005

Cumulative

till 2010

Cumulative

till 2015

Civil Aerospace Manufacturing 51 564 1,967

Metals 4 45 157

Composites 3 28 98

Systems and Associates 10 110 384

Avionics 9 104 364

Standard Parts 2 23 79

Manufacturing Outsourcing 7 73 256

Others (Consumables/Tooling) 3 28 98Airport Development and Services 800 6,978 18,069

CommercialMRO 331 2,539 8,739

Optional Aircraft Equipment and Systems 15 123 400

Testing and Certification - 5 12

Consulting 12 98 286

Training 40 446 1,380

Software and Systems 134 1,071 3,123

PLM and Knowledge Engineering 4 29 88

Pilot Supplies and Navigational Aids 4 32 82

Others (Financing, Leasing, Insurance,etc) 360 6,162 18,674

USD Millions

Market Size

Estimated that more than 50% of the above market will be catered by foreign players

Source: UK Trade and Investment

8/3/2019 12312007

19/24

IL&FS Ltd.19

Sell existing products and services into growing Indian market directly/indirectly (through OEMs)Level 1

Level 2

Level 3

Level 4

Formulate strategic alliances, CRM bases, support bases 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

8/3/2019 12312007

20/24

IL&FS Ltd.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/Re

pair/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 established

Sell 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

8/3/2019 12312007

21/24

IL&FS Ltd.21

Summation

IndianAviation 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 IndianAviation

Sector

Authorities have initiated various steps to implement modernization, reconstruction and development of airport

infrastructure to implement infrastructure development plan

Provides a huge opportunity for private players operating inAerospace and allied industries

Significant opportunity for foreign companies as Indian companies not technologically equipped to cater to

requirements

8/3/2019 12312007

22/24

IL&FS Ltd.22

8/3/2019 12312007

23/24

IL&FS Ltd.23

38 40 41 4251.3

52.3

0

20

40

60

2000 2001 2002 2003 2004 2005

Financial Year

Million

P

assengers

HUGE POTENTIAL MARKET

Huge potential market Discount Fares/Low Cost Carriers fares

competitive to premium railway fares

Ever increasing reach

Indian Railways-Premium Passengers

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

The Increase in Consumerism and

Affordability ofAir 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

8/3/2019 12312007

24/24

IL&FS Ltd.24

International Air Traffic growing at CAGR@15%

Growing Indian economy and globalized trade

Rise in international tourism

International Air Passengers

PAX

(inMn)

11.913.2

15

18

0

5

10

15

20

FY02 FY03 FY04 FY05

Financial Year

Tourism

Domestic Tourism growth CAGR @ 15%

Boost with rising per capita income andincreased consumerism

Foreign Tourist Arrivals growth @ 20% for 2004

and 2005

136 140160 168

190220 236

270309

370

0

100

200

300

400

Year

MnPassengers

Growth Drivers