The GVK Group's success in raising more than Rs 7,600 crore to reduce the debt burden and acquire a 23.5 percent stake in Mumbai International Airport (MIAL) will be a setback to the Adani Group that has been trying for a toehold in the prestigious company, reports suggest. The Adani Group, that successfully bid for operating five airports, has been trying to acquire a stake in the company that operates Mumbai airport and has won the bid to develop the Navi Mumbai airport.
"GVK Power & Infrastructure's subsidiaries, GVK Airport Developers (GVKADL) and GVK Airport Holdings (GVKAHL) have entered into definitive agreements with subsidiaries of the Abu Dhabi Investment Authority (ADIA), Public Sector Pension Investment Board (PSP Investments) supported by global airports platform AviAlliance, and the National Investment Infrastructure Fund (NIIF)," said a press release from the company. "They will make an aggregate investment of Rs 7,614 crore, into GVKAHL."
The Adani Group ntered the airport business last year, successfully bidding to take over the running of the airports in Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram, and Mangalore.
The GVK Airport Holdings will thus have four shareholders – GVK Airport Developers, ADIA, PSP Investments, and NIIF – and the GVK Group will hold 20.9 percent of GVKAHL. The deal values GVK's airport assets, which include Mumbai airport and the upcoming Navi Mumbai airport, at Rs 9,608 crore, a report on the Economic Times website says.
Delay in payment
The GVKAHL is the holding company of MIAL, which runs the Mumbai airport and has won the bid to develop the Navi Mumbai International Airport (NMIA) through MIAL's 74-percent subsidiary Navi Mumbai International Airport (Private) Limited (NMIAL).
"Proceeds from the transaction will be used by GVK to primarily retire debt obligations of its holding companies significantly and fund the purchase of additional shares in MIAL by GVKAHL from Bidvest and ACSA in accordance with the right of the first offer already exercised by GVKAHL," the statement said. "The amount for payment to Bidvest will be deposited in an escrow account before the end of October as advised by the arbitration tribunal," the report said quoting a spokesperson of the company as saying.
Bidvest and ACSA, which together own about 23.5 percent in MIAL and were looking to exit the company, had offers from the group of Gautam Adani, from Gujarat, known to be close to Prime Minister Narendra Modi's Bharatiya Janata Party (BJP). The GVK Group owns 50.5 percent of MIAL and the rest is held by the Airports Authority of India (AAI). With the purchase of Bidvest's 13.5 percent and ACSA's 10 percent, the GVK will take its stake to 74 percent.
Management and branding
The Adani Group entered the airport business last year, successfully bidding to take over the running of the airports in Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram, and Mangalore.
Bidvest had, earlier this year, offered its stake in MIAL to GVK under the right of first refusal (RoFR) provision. The GVK had sought to exercise the option but a delay in payment had forced Bidvest to move the Delhi High Court. The court allowed Bidvest to move an arbitration tribunal that gave GVK until October-end to make the payment.
The company said that the management and branding of the airport will remain with the GVK Group following the transaction. "GVK Reddy will continue as executive chairman and GV Sanjay Reddy as managing director in both MIAL and NMIAL. Both airports will continue to be branded as GVK Airports," it said.