(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

MUMBAI  - International passengers aren’t landing much at Mumbai’s airport these days because of Covid-19 restrictions. Some international investors might be kept off the runway too: a unit of Adani Enterprises is taking over India’s second busiest airport by trampling over a stalled $1 billion deal the seller had agreed with a consortium including Abu Dhabi Investment Authority and PSP, one of Canada’s biggest pension investment managers. It’s a cattle-class affair.

Gautam Adani’s roads-to-mining services conglomerate might seem like a white knight to lenders including Goldman Sachs and HDFC Bank. By acquiring debt, the tycoon is offering them a quick out and chance to recover most of their advances to GVK, the 50.5% owner of Mumbai International Airport Limited (MIAL). Debt at the holding company might amount to about $600 million, according to one person familiar with the situation, with more parked elsewhere.

The airport has other troubles. Salaries have not been paid. Pandemic pain aside, government agencies have launched investigations into GVK and the airports business over alleged wrongdoings. That’s one reason the consortium has struggled to close a 2019 agreement to buy a majority stake in MIAL’s parent. Other obstacles have included litigation between GVK and other shareholders.

Even so, it sets a bad precedent: the sidelined buyers won a competitive tender process and have spent almost two years trying to finalise a transaction. Before GVK’s announcement on Monday that it will terminate the deal, the frustrated investors even wrote to Prime Minister Narendra Modi’s government to plea for a fair and transparent process as Adani was preparing to swoop in.

A cleaner outcome would have been a fresh tender. Adani’s deal might prove faster but it’s also more opaque so far and will involve a debt-for-equity swap on undisclosed terms. Lenders might face haircuts on their loans, and some banks are yet to sign off. Either way, Adani, who has already won rights to run six airports, will be cementing his competitive grip.

 

CONTEXT NEWS

- Adani Enterprises said on Aug. 31 that one of its units had entered into an agreement with GVK Group to take control of Mumbai Airport, India’s second busiest.

- GVK Group, through a company called GVK ADL, owns a 50.5% stake in Mumbai International Airport Limited.

- As part of the deal, Adani will acquire the debt from various GVK lenders, including a consortium led by Goldman Sachs, and convert the acquired debt into equity on mutually agreed terms, GVK said in a separate statement without providing further details.

- GVK also said it had terminated a deal with the Abu Dhabi Investment Authority, Canada’s PSP, and India’s National Investment & Infrastructure Fund. The investor group had announced a definitive agreement in October 2019 to pay 76.1 billion rupees ($1 billion) for a 79.1% stake in the holding company of Mumbai International Airport Limited.

- The seller, GVK, said it agreed to “cooperate with Adani” because it needed to bring in a “financially strong investor in the shortest possible time”.

 

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Robyn Mak and Sharon Lam) ((una.galani@thomsonreuters.com; Reuters Messaging: una.galani.thomsonreuters.com@reuters.net))