The Maharashtra government and its agency, the City and Industrial Development Corporation (CIDCO), are unlikely to stall Adani Enterprises Ltd from taking control of the floundering international airport project at Navi Mumbai despite a lock in period for the lead partner to hold at least a 51 per cent stake for seven years after starting commercial operations of the new airport.

The GVK Group had signed an agreement for building and operating the Navi Mumbai airport in 2018.

If Adani Enterprises succeeds in buying a majority stake in Mumbai International Airport Ltd, the GVK unit that runs India’s second busiest airport, the deal will help Gautam Adani lay hands on the Navi Mumbai airport project also. This is because MIAL holds 74 per cent stake in the Navi Mumbai International Airport. The balance stake in the project is held by CIDCO. MIAL has to hold a minimum 51 per cent stake in Navi Mumbai International Airport Ltd (NMIAL) for seven years after starting commercial operations. But, even if the shareholding of MIAL undergoes a change (following the stake sale to Adani), MIAL as an entity will remain. “For NMIAL, it doesn’t make any difference other than the fact that Adani will come in place of GVK as the majority share holder of MIAL,” a Maharashtra government official briefed on the matter said.

“A final decision on the ownership change in NMIAL will be taken by the board of CIDCO and State Government’s high-powered committee,” a senior CIDCO official said.

Multiple challenges

Gautam Adani could become a ‘white knight’ for the beleaguered airport operator GVK Group which is battling challenges on multiple fronts, including financial woes, a CBI and ED probe into allegations of siphoning off funds from Mumbai airport and arbitration with its minority partners in MIAL over stake sale.

The Hyderabad-based Group’s plan to raise funds by selling stake in its airport holdings company to foreign and local funds hasn’t materialised, hurting its ability to borrow money from banks and achieve financial closure for the new airport estimated at ₹16,000 crore.

NMIAL hasn’t responded to a notice issued by CIDCO seeking details of financial close and bank documents on project funding, the CIDCO official said. NMIAL had to achieve financial closure for the project by July 6, 2018, according to a concession agreement signed between GVK Power and Infrastructure Ltd and CIDCO on January 8, 2018.

When the financial closure did not happen at the end of six months from the date of signing the agreement, CIDCO gave a waiver to NMIAL and jointly agreed to proceed with the project without financial close by setting July 7, 2018 as the appointed date for starting work. “There were some encumbrances remaining on project site. So, there was a mutual understanding that the project should not suffer due to these issues,” the official said.

Land development pact

Accordingly, CIDCO carried out the pre-development work and handed over the site to NMIAL, after signing a Land Development Substitution Agreement on July 7, 2018 for starting construction with their own funds.

NMIAL hired L&T as EPC contractor but failed to issue a “notice to proceed” to it for the actual work to begin, resulting in a default. “Because of this, they have defaulted on all the subsequent milestones associated with the project,” the official said.

A GVK official said that the company was facing difficulties in tying up funds for the project because banks were not comfortable in lending money as it was yet to get the entire land required for the airport free of encumbrances, an argument rejected by the State government.

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