Stalled Navi Mumbai airport to take off with fresh fund infusion by Adani

Project has been under planning for past 15 years but failed to close financially as GVK group, from whom Adani is taking over, is neck deep in problems

With the Adani group set to take over Mumbai International Airport Ltd (MIAL) from the cash-strapped GVK group, bankers said the stalled Navi Mumbai airport project will finally be able to take off with infusion of fresh funds by Adani.

The project, which has been under planning for the past 15 years, failed to close financially as GVK group was buried neck deep in financial problems. With no construction activity at the project site, the project cost has gone up by Rs 5,000 crore, say bankers.  

The GVK group had blamed lack of complete land acquisition by Cidco, the 26 per cent stake in the Navi Mumbai airport, for delay in financial closure.  Some three per cent of the land owners at the project site have not yet surrendered the land – leading to the delay, said a source.

The Navi Mumbai airport future was becoming uncertain as cash balance at its parent firm, MIAL to Rs 150 crore with unutilised working capital of Rs 110 crore as of August 1, 2020. In the fiscal 2019, a Crisil report said, MIAL had made upfront investments of Rs 905 crore made in the Navi Mumbai airport in fiscal 2019.  But this was not enough to kick start the project as Yes Bank, which had earlier agreed to fund the project, backed out.

The GVK group won the rights to develop the new airport in February 2017. Since then, the group was trying to raise funds for the project from banks. Though L&T had won the construction contract for the project, it did not start any work at the site, said a L&T official asking not to be quoted. The only work done at the site is by Cidco which has levelled the land and raised the height of the entire land parcel.

As per the present equity structure, GVK Airport Holdings owns 50.5 per cent stake in Mumbai International Airport Ltd (MIAL), which, in turn, holds 74 per cent stake in Navi Mumbai airport. With Adani group now set to acquire MIAL, it will be able to raise funds at a much competitive rate than GVK which had been defaulting to bank loans in the last few years. MIAL currently has 10,000 crore of bank loans and an additional debt raise as non-convertible debentures.

For the fiscal ended March 2019, MIAL earned revenues of Rs 3,847 crore and made a profit after tax of Rs 100 crore. Its latest financial details are not available.  In May this year, alarmed by the delay in the project, Cidco, the Maharashtra-owned authority co-developing the project, had asked the GVK group to prove that it has financial capability to finish the project after a series of downgrades of the group companies by rating firms.

In a communication, Cidco had said the financial stress of GVK group is causing insurmountable delay in equity infusion as required in NMIAL, and consequently development of the project is adversely affected. “The proposed senior lenders in their discussions with the Cidco have conveyed that the present financial condition of the promoters of NMIAL is a major hurdle towards achievement of financial close for the project,” Cidco wrote to GVK.

The Cidco asked NMIAL and MIAL to show that both are in position to satisfy all the conditions precedent (other than possession of the 100 per cent right of way of the site) to avail the initial disbursement under the financing agreements.

READY FOR A TAKE OFF
 

• Adani to infuse funds in Navi Mumbai airport

• Fund raising will easier for Adani group

• Cidco wants strong financial partner 

• Project cost gone up by Rs 5,000 cr due to delay