Estimation of fair rate of return on equity for Delhi International Airport

Abstract

This paper deals with the special case of the economic regulation of Delhi Airport. Presented in the form of a case study, the paper discusses the background of the case, the objective of the regulatory body and the approach to regulation for Delhi Airport. The fair rate of return on equity (ROE) for Delhi Airport was calculated by using the capital asset pricing model by means of comparable entity analysis. It is worth mentioning that the case presented in this paper forms part of the Airports Economic Regulatory Authority sponsored research project on the estimation of a fair ROE of Delhi Airport. The results are presented with a brief discussion on the implications of the findings in the broader context of passengers, airlines, investors in Delhi Airport, the regulator and the Ministry of Civil Aviation of the Government of India.