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

Together with the Federal Bank, in which he holds 4.47 percent stake, the lone non-Arab director of the Abu Dhabi Chamber of Commerce and Industry and founder of the $5.1 billion LuLu Group will be allotted five percent shares.

Yusuffali is also the single largest individual shareholder and one of the director of the Cochin International Airport Limited (CIAL), which profitably runs India’s first corporate airport for the past one and a half decades in the southern Indian state.

He also holds influential 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 five percent stake to retail investors living abroad whose response so far was lukewarm unlike in the case of CIAL that 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 3,662,4204 and total paid-up capital received so far is Rs2.3 billion.

India’s Defense Minister A. K. Antony will formally flag off the its runway’s construction on Sunday. Engineering and construction major Larsen & Toubro has already started work on the runway, taxiway, apron and other related infrastructure.

“Of the 16 percent shares earmarked for the public, six percent have been sold out while Yusuffali and the Federal Bank together were ready to subscribe five percent. The remaining five percent 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 percent stake in the firm converting its landholding into equity while Bharat Petroleum Corporation Limited (BPCL) and other public sector entities have subscribed 23 percent stake.

The Airport Authority of India has decided to acquire 26 percent stake which will be announced by KC 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 Rs15.9 billion while the authorized equity capital is Rs10bn. The cost of land, converted into equity, was fixed at Rs2.94 billion. 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 Rs9 billion this year and the banks have offered money at an interest rate of 10.5 percent. We are weighing the options”.

The work on the passenger terminal, air traffic control tower and administrative block will begin in April-May and completed the next year. The first flight is expected to take off from the airport by the end of next year as per the timeline set by the company.

“We have also decided to provide excellent road and rail connectivity to the airport,” said Babu.

“The Railways had approved the linkage in its 2010-11 budget and completed a preliminary survey. We are also building or improving eight roads leading to the greenfield airport”.

The airport, coming up in 2000 acres, will cater to a large number of people from the region staying in the Gulf countries and open up immense potential of tourism and Kannur’s famed cotton wears.

Besides the existing Calicut, Cochin and Trivandrum airports, surviving mainly on the Gulf-bound migrants, the state is also planning another international airport in the Central Kerala heritage town of Aranmula, which will be India’s first private airport in which the state government was offered a 10 percent “sweat equity”.