GVK plays its cards to sell 49% stake of its airport business to ADIA & NIIF

The tussle to control Mumbai International Airport has intensified after GVK Power & Infrastructure, which controls Mumbai International Airport Limited (MIAL) has offered to sell its 49 percent stake of its airport holding company to sovereign wealth funds Abu Dhabi Investment Authority (ADIA) and the National Investment & Infrastructure fund (NIIF). The decision came around after a week of crucial hearing in Delhi High Court. Different parties had agreed to settle a dispute over plans of selling MIAL stakes by ACSA and Bidvest services before court and GVK had assured of buying out minority investors.

The move of GVK is being seen as a fresh attempt to thwart Adani group’s attempt to gain a foothold in MIAL and at the same time reducing its debts, said sources. Adani group had offered to acquire around 23.5 per cent stake in MIAL from different parties.

GVK’s additional stakes in MIAL

Around a month ago GVK had acquired additional 10 per cent stake in MIAL for Rs 924 crores from Airports company South Africa (ACSA) Global limited. Prior to this GVK had acquired 13.5 per cent stake in MIAL from another South African company Bid Services Division (Mauritius) limited (Bidvest). By April GVK’s share in MIAL stood at 74 percent.

The Adani bid

The huge investment came after Adani group entered the airport business by bidding highest for six government-run airports namely Ahmedabad, Jaipur, Lucknow, Thiruvananthapuram, Guwahati and Mangalore. Following the aggressive bidding, Adani group had become third largest private airport operator of the country in one swoop after GMR and GVK. Sources said the stake sale is yet another strategy to stave off offers from Adani group which is interested in Mumbai airport. Till December 31, 2018, GVK Group held 50.5 per cent stake in MIAL, while South Africa’s Bidvest Group and ACSA owned 13.5 per cent and 10 per cent, respectively. The Airports Authority of India (AAI) owned the remaining 26 per cent.

Proposal before BSE

“GVK Power & Infrastructure announced that its subsidiaries, GVK Airport Developers (GVKADL) and GVK Airport Holdings (GVKAHL), have signed a term sheet and exclusivity agreement with the ADIA and the NIIF for an investment in new shares in GVKAHL equating to a 49% stake,” the company said in a filing to the Bombay Stock Exchange.

Why Mumbai airport

GVK manages and operates the Chhatrapati Shivaji Mumbai International Airport Limited (MIAL) and has also won the contract to build and operate India’s largest Greenfield airport at Navi Mumbai with a cost of around Rs 16,000 crore. The company is in efforts to raise fresh funds for the greenfield project and the sale is aimed for the same, said sources.

The GMR group-run New Delhi airport handled 65.69 million passengers in fiscal 2018 while the GVK group-run Mumbai airport handled 48.5 million during the same period. Whereas the six airports of Adani group together handled 30 million passengers—23.6 million domestic and 6.4 million international—last fiscal year, a growth of 22 percent over the previous year, according to Airport Authority of India.