Adani will buy GVK Airport Developers’ debt, against which a 50.5% stake in MIAL is pledged
Adani group will take control of India’s second-busiest airport of Mumbai, in the biggest-ever thrust to its ambition to become a top airports operator.
The Gautam Adani-controlled conglomerate said on Monday that it has entered into a definitive pact to buy the debt of GVK Airport Developers Ltd, against which a 50.5% stake in Mumbai International Airport Ltd (MIAL) has been pledged.
The Adani group will also buy the combined 23.5% stake held by Airport Company of South Africa (Acsa) and South Africa’s Bidvest group in MIAL, for which it has obtained the approval of the Competition Commission of India, according to an Adani group statement. This would give the group a 74% stake in MIAL. The remaining 26% stake would be held by state-run Airports Authority of India.
The deal stands to also give Adani Airport Holdings Ltd (AAHL) a controlling stake in the Navi Mumbai International Airport being developed by GVK group. Also, with one of India’s two most profitable international airports in its kitty and having won the development and operation rights over a 50-year lease for the Ahmedabad, Lucknow, Mangaluru, Jaipur, Thiruvananthapuram, and Guwahati airports, Adani Enterprises Ltd will be the biggest private sector airport operator in India in terms of the number of airports.
Once the transaction with GVK is completed, it will bring an end to the ongoing tussle between the two sides over control of the airport asset.
Mint reported on 25 August that GVK approached lenders to urgently raise cash to avert a potential takeover of MIAL.
“The discussions were ultimately not fruitful because of the current market condition and the poor outlook for the aviation sector," a person aware of the matter said, seeking anonymity.
In 2018-19, the latest available full-year financials of GVK Power and Infrastructure, the company posted a revenue of ₹4,098 crore with the airports subsidiary contributing about ₹3,700 crore, or over 90%. The Mumbai airport contributed ₹119.4 crore to net profit even as the group reported an overall loss of ₹363.49 crore. As of March 2019, GVK Power and Infra had a net debt of ₹13,600 crore.
The Mumbai airport handled a combined traffic of 45.92 million passengers in 2019-20, of which 12.36 million was international and the rest domestic.
The stake purchase is the culmination of continued efforts by the Adani group. Last year, Adani began talks with South Africa’s Bidvest group.
A transaction was, however, stonewalled by GVK, which, according to people aware of the matter, viewed the move as an attempted hostile takeover. Subsequently, GVK agreed with several investors: Abu Dhabi Investment Authority, Canada’s Public Sector Pension Investment Board, and state-backed National Investment and Infrastructure Fund to sell a 79.1% stake in GVK Airport Holdings for ₹7,600 crore. The deal, had it gone ahead, would have allowed GVK group to repay lenders and retain control of MIAL.
However, on Monday, GVK said the aforesaid deals with investors stands terminated. It did not disclose reasons.
Announcing the deal, G.V.K. 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 MIAL. 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."
“It is under these circumstances that we agreed to cooperate with Adani so as to achieve these twin objectives. Further, 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," Reddy added.
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