Adani pays big bucks, lands 5 airports on offer

Adani Enterprises Ltd has won the rights to run five of the six airports, the operations of which are being privatized, beating rival bidders by a steep margin and overnight turning into India’s largest airport operator outside government control.

The Airports Authority of India (AAI), the current owner and operator of Ahmedabad, Jaipur, Lucknow, Thiruvananthapuram and Mangaluru airports, said in a press release on Monday that Adani Enterprises offered ₹177, ₹174, ₹171, ₹168 and ₹115, respectively, as revenue per passenger that it would pay AAI in exchange for a 50-year concession agreement to run these airports.

Adani Enterprises was advised by Mott MacDonald, Ramboll India, EY and CAPA in the bidding process, a person close to the company said. The financial closure for the deals and the legal work involved would mean that the official handover of the assets would take three-four months, the person said, requesting anonymity.

AAI will issue letters of award for the five airports to Adani Enterprises on Thursday. The winning bidder for the sixth airport, Guwahati— which has six active bidders—will be announced on Tuesday.

With the successful bids, billionaire Gautam Adani-controlled Adani Enterprises has broken the duopoly of the GVK and GMR groups as the largest private sector airport operators in the country. While GVK, the concessionaire for the Mumbai international airport and the developer of the upcoming Navi Mumbai airport, was a key absentee in the latest round of airport privatization, the GMR group offered some of the lowest bids. Burdened with debt, both groups have been leveraging their infrastructure assets to raise equity and settle with lenders. GVK is also fending off an attempt by Adani Group to buy a minority stake in Mumbai International Airport, where the former is the concessionaire, by offering to buy out the minority shareholders’ stake instead.

Adani Group’s experience in aviation is limited to owning an airstrip near its flagship port at Mundra in Gujarat, and an airline licence for Karnavati Aviation. To its advantage, prior experience in running an airport wasn’t a qualifying requirement in this bidding process.

With Adani Group’s flagship ports business bringing in steady revenue, it is now aggressively pursuing new opportunities. From 2014, the group has diversified into power transmission and distribution, aerospace and defence, renewable energy, roads, slum redevelopment, and copper smelting and coal mining in Australia.

“In the first 90 days, Adani Enterprises will need to put over ₹2,500 crore on the table for taking over the regulatory asset base from AAI,” said an industry expert, who did not want to be named. “Besides this, over the next five years, it would have to invest up to ₹10,000 crore in upgrade and expansion of the airports. Over and above this is the revenue-sharing agreement with AAI. I think, considering all these factors, it is likely that the group may, over time, bring in an equity partner.”

According to an analysis by Capitaline, the group’s combined debt among its listed entities totalled almost ₹1.12 trillion, with Adani Enterprises accounting for ₹15,000 crore.

On Monday, Adani Enterprises raised ₹1,662 crore by making an all-cash sale of its logistics arm to group firm Adani Ports and SEZ. Minority shareholders of Adani Ports were unhappy with the group’s decision and sent the stock crashing 8.4% on the bourses even as the deal allowed Adani Enterprises to raise cash to meet its obligations.

“Overall, the tendering process augurs well for the aviation sector in India,” said Jagannarayan Padmanabhan, director and practice leader (transport and logistics) at Crisil Infrastructure Advisory. “Till now, we only had two strong players, but now there’s a third entrant. Back-of-the-envelope calculations show that AAI will stand to earn revenue of at least ₹525-575 crore per annum from these five airports, and that will increase over the years as traffic rises. Historically, we’ve seen good growth at these airports, so an uptick in revenue for AAI is all but certain.

“As long as the government sticks to timelines and the process is transparent, allowing private capital deployment in public infrastructure is a significant step forward.”

A statement from an Adani Group spokesperson said: “The Indian aviation industry is a growing sector, with the government’s continuing focus on creating world-class airports. We would be aiming to scale up the infrastructure to bring these facilities on a par with global standards.”

The spokesperson declined to comment on how the airport business would be funded and whether it would bring in partners either for equity or operational know-how.

In a separate development, GMR Infrastructure has emerged as the highest bidder for the greenfield international airport at Bhogapuram, outside Visakhapatnam.