Arun Kumar Shrivastav
As the Adani Group is inching closer to sealing a deal with GVK Group to buy out its stake in Mumbai International Airport (MIAL), the ownership of Navi Mumbai International Airport (NMIA) is also likely to shift to the Adani Group. MIAL in which the GVK Group has a 50.5% stake holds a 74% stake in NMIA.
In a major development, GVK Group that announced financial closure of the Rs 16,700-crore Navi Mumbai International Airport project, with State Bank of India (SBI) as the lead financier.
The ambitious second airport of Mumbai at Navi Mumbai is being built by a consortium led by GVK Power and Infrastructure that includes Mumbai’s City Industrial Development Corporation (Cidco) and Airport Authority of India (AAI).
The extended period of lockdown due to the Covid-19 pandemic has impacted the aviation sector badly. And the latest news of distress comes from the country’s second-largest airport, Mumbai International Airport (MIAL). Alarmed by the falling finances, the lenders have asked the GVK group that holds a controlling stake in MIAL to present a viable repayment plan. The RBI moratorium to repay the loans comes to an end this month.
The lenders’ ultimatum has come after CRISIL downgraded MIAL’s debt instruments early this month after MIAL’s cash flow was found to be significantly low against its debt servicing requirements.
CRISIL’s downgrade for MIAL’s debts instruments include Rs 9,782 crore of bank debt and Rs 2,000 crore of NCDs.
In a development that closely followed the banks’ ultimatum is a renewed bid by the Adani Group to acquire MIAL. The group is reported to be in talks to acquire a controlling stake in the Mumbai airport. At the moment the MIAL’s stakes are distributed among GVK Group that holds 50.5%, the Bidvest Group and Airports Company South Africa (ACSA) that holds 23.5%, and Airport Authority of India (AAI) that controls the remaining 26% stake. The initial round of talks are said to be completed and a formal announcement of the deal is expected in the coming weeks.
In March 2019, the Adani Group had offered to buy 13.5% stake of Bidvest in MIAL for Rs 1,248 crore. It had also made an offer for the 10% stake held by another South African company ACSA Global. However, at that time GVK blocked the deal on the grounds that it had the right of first refusal. The matter got stuck in legal tangles and made it to an international tribunal. But GVK was not able to make a matching offer.
Subsequent to this, GVK Group struck a deal to sell 79% stake in GVK Airport Holdings to a consortium of investors that included the National Investment and Infrastructure Fund (NIIF), PSP Investments (PSP), and Abu Dhabi Investment Authority (ADIA). The GVK Group had planned to use the money to settle debts of some of its key holding companies. This was necessary to stop the Adani Group from making takeover bids.
However, the proposed deal between the GVK Group and the Adani Group got another twist when ADIA and PSP Investments wrote a letter to the Indian PMO and Union Finance Ministry alleging breach of contract by the proposed deal between GVK and Adani groups.
These investors have claimed that if the deal between GVK and Adani groups to acquire MIAL by the later gets through, it will be a breach of contractual agreements with the investors which had agreed to take over the company that runs the Mumbai Airport.
They have also sought time from the Indian authorities for a meeting to sort out the issues at the earliest.
The development came in wake of a recent report that Gautam Adani-led Adani Group is set to acquire a 74 percent stake in MIAL, which operates the country’s second-largest airport.
In October 2019, the consortium of ADIA, PSP and NIIF had proposed to purchase 79 per cent shares in GVK Group’s airport holding company GVK Airport Holdings for Rs 7,614 crore. However, the deal got stuck due to legal proceedings.
If the Adani Group succeeds in its takeover bid of MIAL, it will also have a controlling stake in the proposed Navi Mumbai International Airport in which MIAL holds a 74% stake. This will also make the Adani Group the second-largest private airport operator after the GMR Group.
Last week, the Union Cabinet had approved the handing over of Jaipur, Guwahati and Thiruvananthapuram airports to the Adani Group. These airports are part of the six airports the Group had won the right to develop, maintain, and operate for 50 years. Ahmadabad, Lucknow, and Mangalur airports of this lot have already been awarded to the Adani Group.