Why the takeover by Adani should be positive for MIAL
During the week, Adani Airports took full control of Mumbai International Airport Limited (MIAL). This deal has been on for some time but eventually, the GVK group of Hyderabad relented and sold their stake in MIAL to Adani, giving the latter majority control. This is the much- needed boost to the Mumbai Airport.
How Adani entered MIAL
Adani Group’s plans to dominate the ports and aviation business was never a secret. Adani group had been angling for the GVK stake in MIAL for quite a while but GVK had been steadfast in not giving up their stake. Eventually, it was the burden of Rs.8,000 crore debt that did them in. It happened in two stages. In the first stage, the two South African companies that have invested in MIAL, wanted an exit and GVK did not have the resources to buy them out. That is when Adani chipped in and took over the stake of 23.5% from them.
The bone of contention was, however, the GVK stake. GVK was appointed the manager for the MIAL and Bengaluru airports. However, the group stretched itself and spread too thin leaving MIAL with nearly Rs.8,000 crore of debt. The bankers had been consistently applying pressure on GVK group to sell out their stake or repay the loans. With little by way of loan repayments, GVK group had no choice but relent and sell their stake in MIAL to Adani. This effective brings GVK’s airport foray to a conclusion.
Time for next steps
Now that there is greater clarity on the MIAL ownership, other projects can go ahead with greater clarity. To begin with the repayment of the huge debt burden will make the MIAL business more viable at this juncture and also reduce the financial and solvency risk. Repayment of loans is one of the commitments that Adani group has given. Secondly, the much-awaited Navi Mumbai airport can now take off in right earnest. That project had been hanging fire for a long time and now Adani has committed to start the project in Aug-21 and complete the airport by 2024. That is a big step.
Adani is a good deal for MIAL
Keeping the management of one of the busiest airports in India in a state of flux was never a good idea. The takeover of MIAL by Adani gives certainty to the airport plans. For Adani, this is a natural extension and with MIAL, Adani group will account for 25% of passenger traffic and 33% of all air cargo on an annual basis. That is the kind of business scale that makes real business sense for the airport business and that is the strength that Adani will bring to the table. Secondly, for the airport business to really be viable, the monetization of adjoining land via malls and other real estate properties must start off in right earnest. Hopefully, the entry of Adani can give a big push to how the airport model was originally envisaged!