GVK group wants AAI aid to block Adani's bid for Mumbai airport

GVK group owns 50.5% in MIAL, which operates the country's second busiest airport

The GVK group is planning to exercise the right of first refusal to stall the Adani group’s entry into Mumbai airport, but high debt may force it to seek help from the Airports Authority of India (AAI).

The Adani group has proposed the acquisition of a 23.5 per cent stake in Mumbai International Airport (MIAL) from two South African entities, as it looks to expand its aviation business. The move could bring it in conflict with the GVK group.

The GVK group owns 50.5 per cent in MIAL, which operates the country’s second-busiest airport. GVK holds the right of first refusal in case any of its partners wishes to exit the venture. Accordingly, a notice has been served to MIAL based on the Adani group's offer. AAI holds the remaining 26 per cent stake. 

A source close to GVK said the company would exercise the right of first refusal clause to purchase a 13.5 per cent stake held by Bidvest and 10 per cent held by Airports Company South Africa (ACSA). Experts, however, are skeptical of the move, given the company's high debt and tight liquidity.  

The 23.5 per cent stake held by the two South African entities is being pegged at around Rs 2,300 crore.

AAI will have to be given an option to acquire the stake in case the GVK group does not exercise the right of first refusal according to the agreement between the parties. Sources said the issue was likely to be discussed in MIAL's board meeting, but given AAI's focus on building seaports and heliports, it might not be very keen to commit more capital in MIAL.

The GVK group has run into losses over stalled power projects and is seeking to mop-up funds through stake sales. The group has consolidated debt of around Rs 24,000 crore and one such plan is selling stake at airports holding company level. The group is servicing debt regularly, but is looking to trim its borrowings. Thus, the Adani group's plans to acquire a stake in Mumbai airport has put the pressure on GVK as it will have to raise funds to block the bid. 

The GVK and Adani groups did not respond to email queries.

"The GVK group has time till February 27 to match the offer. If they don't do it, according to the terms of the concession agreement, AAI will have 30 days to match the offer after which the stakes can be offered to third party," a senior AAI official said, adding the PSU board might consider retaining the stake if the majority shareholder in MIAL, which is the GVK group, gives in writing that the takeover attempt from the Adani group is hostile in nature.

The official, however, said the PSU had to get a nod from DIPAM since the capital outgo will be around Rs 2,100 crore. "For any acquisition beyond Rs 500 crore, the AAI board will have to take approval from Dipam," he said.