Adani group forays into airport sector; wins bid to operate 5 airports

Out of 6 airports, Adani is the highest bidder for Ahmedabad, Jaipur, Mangalore, Trivandrum & Lucknow Airport

Gautam Adani-led Adani Enterprises is the highest bidder for airports in Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, and Lucknow, according to industry sources aware of the development. The government invited bids for these from private players, to manage them for 50 years.

The aggressive bids made by Adani revealed how eager they were to enter the sector.

For instance, for the Ahmedabad airport, Adani outbid the GMR group by quoting Rs 177 per passenger against the GMR’s Rs 85. For the Lucknow airport, Adani bid Rs 171 per passenger beating AMP Capital’s quote of Rs 139. 

The bids were based on the highest monthly fee per passenger that the company would pay the government.

“The Indian aviation sector is growing with the government’s focus on creating world-class airports. For the Adani group, initiatives that contribute to nation building remain a focus area. These airports — lifelines to their respective states — will enable scaling up of the infrastructure to bring these facilities on a par with global standards,” said an Adani group spokesperson.

The Adani group is also likely to win the bid for Guwahati airport, for which bids will be opened on Tuesday. The competition for the airport is weak.

Experts said the entry of a conglomerate such as Adani into the sector would mark the start of a new era of competition, as till now, it has been dominated by only two companies — GMR and GVK. 

To break this duopoly, the government allowed companies without any prior experience to bid for the projects. 

“Till now, the airports sector in India was dominated by a couple of players. The entry of a private player with deep pockets to manage augurs well for the sector,” said Jagannarayan Padmanabhan, director and practice lead, transport and logistics at CRISIL. He added that competition in the sector would increase in the future. 

Till now, the group had a large presence in infrastructure and a small presence in aviation. It has an air operators’ permit for Karnavati Aviation and owns an airstrip in Mundra (Gujarat). These have been utilised for its internal logistical need.

Analysts said the group’s interest in the airport sector was inevitable, considering its growth.

An analyst of a brokerage firm tracking the company said a closer look at the choice of businesses will show it has ventured into sector that are also being supported by government policy.

Between FY14 and FY18, the group entered into four new business segments — wind energy, solar manufacturing, power distribution, and aerospace and defence.

“The airports the group has won are well-developed projects, with an assured catchment area as they are mostly in cities with a wealthy middle class. This makes them safe bets, with a steady and growing traffic,” said an executive of an infrastructure company. For instance, the Ahmedabad airport had a footfall 9.2 million international and domestic passengers in 2017-18, recording a year-on-year growth of 24 per cent. Some analysts, however, are sceptical about such an aggressive foray due to the company’s high debts.

Industry sources pegged that the total investment in the five projects to be about Rs 13,000 crore. Additionally, according to the rules of the concession agreement, the Adani group has to transfer Rs 3,000 crore, which is the total investment by the Airports Authority of India in the five projects within 90 days.

“Operations of Adani Enterprises have remained working capital intensive over the years. Business expansion has been quick due to massive addition of leverage both in power, transmission business primarily supported by the port business. Addition of the airport business in such a large scale may force the company to borrow more,” another analyst tracking the company said.