Adani Group to acquire 74% stake in Mumbai International Airport

Makes group second-largest private airport operator

Gautam Adani-led Adani Group is set to acquire a 74 per cent stake in Mumbai International Airport (MIAL), which operates the country’s second-largest airport, with the current operator settling its disputes with its minority partner and exiting the venture.

With six airports already under its belt, this will make the group the largest private airport operator after GMR Group, which operates Delhi and Hyderabad airports.

The acquisition will also give the Adanis ownership of the upcoming Navi Mumbai airport, in which MIAL holds 74 per cent.

Sources said the transaction under which Adani Group will acquire 50.5 per cent of GVK Group could be announced before next week. Additionally, the Adanis will acquire 23.5 per cent of minority partners, Airports Company South Africa (ACSA) and Bidvest Group. ACSA and Bidvest hold 10 and 13.5 per cent stake, respectively, in MIAL.

Industry sources said Adani Group will pay close to Rs 15,000 crore for the total transaction. 

A person aware of the development said that the promoters of the two groups — G V K Reddy and Gautam Adani — have in-principle agreed on the contours of the deal, which will see GVK ending litigation with Bidvest and ACSA.

GVK and the two minority partners are locked in court battles and arbitration since the past year, with the firms seeking to exit from the airport venture by selling their stake to Adani Group. Citi is acting as a financial advisor to GVK Group, while investment bank Rothschild and Edelweiss are advising Bidvest and ACSA.

 

GVK had moved court to block the attempts of sale, citing it has the right of first refusal. However, the company hasn’t been able to mop up funds.

“There was immense pressure from the lenders on GVK Group, as there were upcoming debt payment schedules of MIAL. The banks were particularly concerned. They felt the parent firm’s poor liquidity position — worsening with the effect of Covid-19 on airport business — would make it difficult to repay. The transaction is a positive for everyone,” said a banker involved in the process. He said GVK’s entire stake in MIAL is pledged with HDFC Bank and YES Bank.

The group will use the proceeds from the transaction to clear debt, which stands at around Rs 6,000 crore.

Rating agency CRISIL last week downgraded the debt instruments of MIAL because of low visibility in cash flows against debt servicing requirement.

CRISIL downgraded Rs 9,782 crore of MIAL’s bank debt and Rs 2,000 crore of non-convertible debentures.

While GVK Group in October 2019 had signed agreements to raise cash of Rs 7,614 from a clutch of investors — Abu Dhabi Investment Authority, Canada’s Public Sector Pension Investment Board, (PSP Investments), and the government-backed National Investment and Infrastructure Fund (NIIF) — the deal didn’t materialise due to differences over management and control, said a person aware of the development. 

A money laundering case filed by the Central Bureau of Investigation against G V K Reddy and his son Sanjay Reddy for siphoning of MIAL’s reserve funds made things bleaker. “Earlier this month, the investors informed GVK that with the ongoing enquiries, it would be impossible for them to put money. NIIF being a quasi-government body, made things more difficult,” the banker said.

Similarly, the Navi Mumbai Airport project was being delayed with implementing agency City and Industrial Development Corporation and lenders raising concerns over GVK Group’s financial capability to complete the project. “With a group like Adani taking ownership of Navi Mumbai project, there will be greater certainty,” the banker said.

Adani Group is likely to appoint ACSA to operate and manage the airport, said a second person in the know. “According to an agreement signed by GVK with the Airports Authority of India during privatisation of Mumbai airport in 2006, if ownership of the airport changes hands, the new operator will have to prove its technical and financial capability of running an airport. Since ACSA has been involved with MIAL since the onset, there are talks to continue for initial days,” the person said.