With Mumbai in pocket, Adani is India's largest private airport operator

The Adani group on Monday said it will acquire GVK's stake in Mumbai airport to become the country's biggest private airport operator, with a cumulative share holding to 74 per cent.

According to a regulatory filing, Adani Airport Holdings Ltd (AAHL), the flagship holding company of Adani group for its airport business, "has entered into an agreement to acquire the debt of GVK Airport Developers Ltd (ADL) in Mumbai International Airport Ltd (MIAL), which will be converted into equity stake”.

This conversion would lead to Adani group getting all of 50.5 per cent stake of the GVK group.

The group will also acquire another 23.5 per cent of minority partners, Airports Company South Africa (ACSA), and Bidvest Group.

"The GVK Group and AAHL have agreed that AAHL will offer a stand-still to GVK, in addition, to release the guarantee given by GVK Power and Infrastructure Ltd with respect to the debt acquired by it," the company said in the filing.

The Adani group said it will also "take steps to complete the acquisition of a 23.5 per cent equity stake from ACSA and Bidvest in MIAL for which it has obtained Competition Commission of India (CCI) approval."

"Upon the acquisition of the debt of GVK ADL, Adani Group will take steps to obtain necessary customary and regulatory approvals, as may be required, to acquire controlling interest in MIAL," it said.

In a separate filing, GVK said it has "agreed to cooperate with Adani Airport Holdings Ltd (AAHL)" under which the billionaire Gautam Adani's group firm will acquire debt from various lenders including a Goldman Sachs led consortium and HDFC.

This debt will be converted to equity at mutually agreed terms, it said.

The two firms did not give details of the financial terms.

Adani said it will infuse funds into MIAL as well as help achieve financial closure of Navi Mumbai International Airport so as to commence its construction. MIAL holds 74 per cent interest in the airport.

GVK Reddy, founder and Chairman, GVK said, "The aviation industry has been severely impacted by COVID-19, setting it back by many years and has impacted the financials of Mumbai International Airport Ltd.

“It was therefore important, that we bring in a financially strong investor in the shortest possible time to improve the financial position of MIAL, as well as to help achieve financial closure of the Navi Mumbai International Airport project, which is a project of national importance."

"When the transaction is consummated, which is subject to customary approvals, we would be reducing a significant portion of liabilities to our lenders, which is of utmost importance to the group," he said.

The Adani group had in March 2019 agreed to acquire 13.5 per cent stake of South African company, Bidvest for Rs 1,248 crore. However, GVK Group blocked the deal claiming the right of first refusal.

GVK, however, could not bring money to the table to buy Bid Services Division Mauritius' (Bidvest) stake and the matter went to court.

With the GVK group's finances under strain, it has now come around to the idea of selling the stake to the Adani group.

After seaports, the Adani group is betting big on the airports sector and has won the bids to run six Airport Authority-built non-metro airports in Lucknow, Jaipur, Guwahati, Ahmedabad, Thiruvananthapuram, and Mangalore.

It has now entered the country's second busiest airport.

ACSA owns 10 per cent in MIAL and the balance 26 per cent stake is held by the Airports Authority of India (AAI).

In October, debt-laden GVK Group entered into an agreement to sell 79 per cent of its stake in GVK Airport Holdings for Rs 7,614 crore to the Abu Dhabi Investment Authority (ADIA), Canada's Public Sector Pension (PSP) Investments, and state-owned National Investment and Infrastructure Fund (NIIF).

Proceeds from this transaction were to be used by GVK to primarily retire the debt obligations of its holding companies.

GVK said has "notified ADIA, NIIF and PSP that the transaction documents stand terminated as it is no longer effective and implementable."

"The reason for this decision was (a) the terms of the transaction envisaged in the transaction documents were not implementable and (b) the alternative proposals discussed would not provide a resolution to the lenders of ADL by the end of August, which was a requirement of our lenders," it added.

The deal comes after the Central Bureau of Investigation (CBI) earlier this month charged the GVK Group with siphoning off funds totalling Rs 705 crore. It is charged with causing a loss of Rs 310 crore to the exchequer by entering into fake work contracts on the land given by the government to MIAL.

With the six non-metro airports and MIAL, the Adani group will become the largest operator of airports other than State-run AAI, which runs most of the airports.

Adani Enterprises in its annual report unveiled its ambition to be the largest private airport developer in the country by developing world-class infrastructure at airports, both at airside and landside, enhancing the passenger experience, creating entertainment destinations (airport village, hotels, and malls).

To achieve the aim, it also plans to increase domestic airline connectivity to new and under-served destinations, and also raise the number of flights to long-haul destinations in the west and also to south-east Asia.

Photograph: Francis Mascarenhas / Reuters.