From an incubator project to a mainstay, the airport business of Adani Group has come a long way. The multinational conglomerate has emerged as a leading player in the Indian airport industry after it signed an agreement to buy a 74 percent stake in Mumbai International Airport Ltd (MIAL), India's second busiest. As MIAL holds a 74 percent stake in Navi Mumbai International Airport Ltd, Adani Group will also hold a 74 percent stake in the much-anticipated airport at Navi Mumbai.

The Gautam Adani-led group forayed into the Indian aviation sector for the first time in February 2019 when it submitted bids to operate, develop and build six non-metro airports of Lucknow, Ahmedabad, Thiruvananthapuram, Guwahati, Jaipur, and Mangaluru.

The Ahmedabad-based conglomerate, with investments in logistics, transportation, utilities, and energy, had surprised the industry with its aggressive bids. At Rs 115 per passenger for Mangaluru and Rs 171 for Lucknow, Adani Group’s bids were over 500 percent more than the bids received from the GMR Group and PNC Infratech respectively. Similarly, it placed a bid of Rs 177 for Ahmedabad airport, nearly 200 percent more than the bid of Rs 60 of Autostrade Indian Infrastructure Development Pvt Ltd.

A year-and-a-half later, the group has emerged as the new operator for a total of eight airports with estimated passenger traffic of over 82 million passengers on an annual basis. This includes around 35 million annual passenger traffic of six non-metro airports, over 45 million annual passengers of Chhatrapati Shivaji International Airport, and an estimated 10 million for the upcoming Navi Mumbai International airport.

The addition of Mumbai and Navi Mumbai airports into its portfolio is not the cherry on the cake for Adani Group. It is the cake itself.

"... This acquisition will catapult Adani​ Group to be the largest private operator both by volume and by a number of airports managed," Jagannarayan Padmanabhan, Director and Practice Leader, Transport & Logistics, CRISIL Infrastructure Advisory said.

"With the debt overhang getting adequately addressed, the development of the Second Airport (Navi Mumbai airport) can now be fast-tracked. Mumbai has, in the past decade, lost out significantly due to the capacity constraint faced at the current airport, hopefully, with the access to fresh capital we will see lot more traction for expanding capacity," Padmanabhan added.

A simple search of the word 'airport' in the annual report of Adani Enterprises for 2018-19 and 2019-20 shows an interesting phenomenon. The word emerges 14 times in the 2018-19 annual report and sees a 1,050 percent jump in the annual report for 2019-20 by getting mentioned 161 times.

A further dive into the annual report provides an idea of what the company has in mind for the airport business.

Adani Enterprises aims to develop "airport villages" and has assured its shareholders that it is "well-positioned" to become the leading airport operator in India. It is banking on growing domestic passenger traffic to achieve this aim.

"With the non-aero revenue, we plan to develop airport villages that can tap into the non-passenger airport visitors," the company has said about its foray.

"We are working towards designing revolutionary airports, with an aim to reimagine the future. Offering seamless processes that facilitate touchless operations especially in the post COVID era, when social distancing will be the new norm," it added.

In addition to providing regional experience architecture in and around all the airports, the Adani Group plans to increase the domestic airline connectivity to the new and underserved destinations and focus on long-haul flights and ASEAN destinations under the international segment.

As for competitors, the proposed arrangement marks the end of a 14-year-old association of GVK Group with Mumbai International Airport. It currently does not operate any other airport in India.

GVK had been in talks with Abu Dhabi Investment Authority, National Investment and Infrastructure Fund, and Public Sector Pension Investment Board (PSP Investments) since 2019 to secure funding but the plan did not materialize. Hence, GVK has now terminated those transaction documents and under the agreement, Adani Group will take over the debt of GVK Airport Developers Ltd and the Adani Group will also offer a stand-still to GVK with respect to the debt acquired.

"The aviation industry has been severely impacted by COVID-19, setting it back by many years and has impacted the financials of Mumbai International Airport Limited. It was therefore important, that we bring in a financially strong investor in the shortest possible time to improve the financial position of MIAL, as well as to help achieve Financial Closure of the Navi Mumbai International Airport project, which is a project of national importance. It is under these circumstances that we agreed to cooperate with Adani so as to achieve these twin objectives," Dr. GVK Reddy, Founder & Chairman, GVK said after the agreement.

This leaves Adani Group with GMR Airports Ltd, the only other major private competitor. It currently operates India's largest airport of Delhi. It also runs Hyderabad airport, the fourth busiest in the country. This takes the current annual passenger traffic handled by GMR group airports to nearly 89 million passengers. In addition, it is also developing a Greenfield airport at Mopa in North Goa for annual traffic of 5 million passengers and another at Vishakhapatnam for 6 million annual passengers.

After looking for partners and ways to raise funds, GMR Group finally underwent a restructuring exercise recently. It has sold 49 percent stake in its airport businesses to France’s Groupe ADP.

Returning to the latest entrant in the sector, for Adani Group, airport management is part of its next generation of strategic business investments. It remains to be seen how strong will the association be for the port-to-airport developer.

First Published:Sept 1, 2020 1:04 PM IST