Companies

Adani takes over MIAL, Navi Mumbai airports after a 2-year tussle with GVK

Forum Gandhi Mumbai/Hyderabad | Updated on August 31, 2020

Enters into pact to buy debt of GVK Airport Developers

Adani Group and GVK Group have formally agreed to bury the hatchet over control of Mumbai International Airport Ltd (MIAL).

As a result of this agreement, Adani Airport Holdings will end up with majority shareholding in MIAL and Navi Mumbai International Airport Limited.

Adani group has entered into an agreement to acquire the debt of GVK Airport Developers Limited, which holds 50.50 per cent equity stake in MIAL. MIAL holds 74 per cent equity stake in Navi Mumbai International Airport Limited. Adani will convert the debt into equity but the financial terms of this arrangement was not disclosed.

While the three foreign investors have served a legal notice against the deal with Adani, GVK has told them that $300 million kept in an escrow account was unilaterally withdrawn by the investors, which was a deal-breaker.

Adani Airport will offer a standstill to GVK, in addition, to release of the guarantee given by GVK Power and Infrastructure Limited with respect to the debt acquired by it. The Adani Group will also take steps to complete the acquisition of a 23.5 per cent equity stake from Airport Company South Africa and Bidvest in MIAL for which it has obtained CCI approval. Once these transactions are complete, Adani will hold 74 per cent stake in MIAL. The balance is held by Airports Authority of India.

Adani also intends to infuse funds into MIAL to ensure that the airport receives much-needed liquidity and also achieves financial closure of Navi Mumbai International Airport to be able to commence construction.

Analysts said the deal is a win-win given that the airline industry is extremely stressed because of lower revenues, financial obligations with banks, royalties, revenue share with the AAI and the government.

“Although this has been a heated battle between GVK and Adanis. Going forward, from the airport’s perspective, it will benefit all stakeholders in the long run. Once the dust settles, it will benefit everyone,” said Mark Martin, Founder and CEO, Martin Consultancy.

Financial stress

GVK group has been under financial stress for some time now and have been trying to raise funds to start work at NMIAL and also sustain MIAL operations. In October, the debt-laden GVK Group entered into an agreement to sell 79 per cent of its stake in GVK Airport Holdings for ₹7,614 crore to the Abu Dhabi Investment Authority, PSP Investments of Canada, and the state-owned National Investment and Infrastructure Fund. GVK has now cancelled this deal following the agreement with Adani.

GVK Reddy, Founder & 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 Limited. 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 NMIAL project, which is a project of national importance. It is under these circumstances that we agreed to cooperate with Adani so as to achieve these twin objectives.”

Adani has been eyeing control of MIAL as part of its overall airport infrastructure plan. The group recently won a politically controversial bid to run the 88-year-old International Airport at Thiruvanathapuram.

It also has the mandate to operate Jaipur and Guwahati airports. The Ahmedabad-based group won the right to upgrade and operate the airports of Lucknow, Mangaluru and Ahmedabad. Mumbai airport, being one of the busiest and most lucrative in the country, has been on Adani’s radar for over a year. In March 2019, Adani offered to buy out Bidvest’s 13.5 per cent stake for ₹1,248 crore. This was then blocked by GVK claiming the ‘first right of refusal’ and Bidvest offered the same price.

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Published on August 31, 2020
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