Adani Enterprises commits Rs 10,000-crore capex for airports business

The capex includes up-front payment of Rs 3,600 crore for 6 airports

Gautam Adani-led Adani Enterprises is the largest  airport operator in India
Gautam Adani

Adani Group's flagship firm, Adani Enterprises Limited (AEL) has committed capital expenditure (capex) worth roughly Rs 10,000 crore for its airport business to be incurred over the next 7 years. AEL has also committed an investment of Rs 7,000 crore for coal and mining business during the current fiscal 2019-20. 

Part of its "next set of businesses", as stated by Adani Group chairman Gautam Adani, airport management is being run by AEL's subsidiary Adani Airports Ltd which won bids for 6 airports recently. Of these, three airports including Ahmedabad, Lucknow and Mangaluru of Airports Authority of India have been approved by cabinet to be leased to AEL in a public private partnership (PPP) mode. Two other airports - Guwahati and Jaipur - are awaiting state approvals, while the one in Trivandrum is in litigation with the Kerala state government.

The committed investment of Rs 10,000 crore will entail an up-front payment of roughly Rs 1,600 crore for the three airports with cabinet approval, followed by an additional up-front payment of Rs 2,000 crore for the remaining airports. In an earnings call on Thursday, Jugeshinder Singh, AEL's chief financial officer, said that the remaining Rs 6000 crore of committed capex will be incurred over a period of 7 years.

"We have committed roughly Rs 10,000 crore investment over a period of 7 years for the airports business. We will have an up-front payment of Rs 3,600 crore for these 6 projects and we will undertake capex of approximately Rs 6,000 crore over a period of 7 years," said Singh, adding that the three airport projects will start generating revenues from April 2020.

Singh stated that the group would focus on both passenger and non-passenger revenues in its airports business going forward, with the latter to be tapped through its city-side business segment. "Typically, at Ahmedabad airport, there is about 11.2 million airport passengers, but the non-passenger segment is three times more than that. Currently, it has EBITDA is just about Rs 95 crore. We expect it to be materially higher once we take it up. We expect to cater the other 30 million people, who are not catered to right now," he said. 

On Thursday, AEL posted a consolidated net profit of Rs 570 crore for the first quarter ended June 30, 2019, as against Rs 80 crore for the same period last year. Consolidated revenues from operations stood at Rs 10,561 crore while that of last year was around Rs 7,558 crore. The company attributed the sharp growth in profits to a one-time income of Rs 328 crore recognized in AEL's Mine Development and Operations (MDO) business.

Commenting on the results, Gautam Adani, Chairman, Adani Group said, "Adani Enterprises continues to make significant strides in lining up the next set of businesses that included airport management, data center parks, roads, water infrastructure and defense & aerospace. Its business portfolio has never been such stronger and each of these businesses led by focus on growth markets with offerings in the right product segments and compelling value proposition."

Singh also stated that AEL had so far invested around $1.1 billion on the Carmichael mine project in Australia, including $856 million for the mine project and roughly $240 million for the rail project, 50 per cent of which is owned by the Adani family. 

Claiming that the progress of the Carmichael project was on track, Singh said that the production was expected to start in 2020-21, with roughly 11 million tonnes of coal expected under mine development in the first phase. Meanwhile, Singh said in the earnings call that there was a plan for further debt raising of $400 million for the project.