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GVK inks pact to sell 49% stake in airports business to ADIA & NIIF


Date: 19-04-2019
Subject: GVK inks pact to sell 49% stake in airports business to ADIA & NIIF
HYDERABAD: Infrastructure conglomerate GVKNSE -2.65 % Power & Infrastructure said it signed an agreement to sell a 49% stake in its airports business to the Abu Dhabi Investment Authority (ADIA) and the National Investment & Infrastructure Fund (NIIF). The investments will help the cash-strapped group to stave off overtures from Gautam Adani keen to buy the flagship Mumbai airport. 

The Adani Group made an offer in January for the 23.5% held by two South African companies, prompting GVK to ringfence itself. 

According to the term sheet, the ADIA and the local fund would invest in GVK Airport Holdings by acquiring new shares. The company didn’t disclose the financial terms, but said it was looking to raise funds to reduce or refinance debt obligations of up to Rs 5,750 crore. “All proceeds from the proposed transaction will be used by GVK towards retiring debt obligations,” the parent company said in a statement on Thursday. 

NIIF and ADIA, the world’s second largest SWF, are likely to infuse the funds through a combination of equity and debt, valuing MIAL at Rs 12,500-13,000 crore as apposed to Adani’s offer of Rs 9,500 crore. Additionally, they are also negotiating a structured debt instrument to infuse Rs 3,500 crore of funds. GVK will use the proceeds to buy out the two South African JV partners Bidvest and ACSA from MIAL and also the three existing lenders ICICI, HDFC Bank and Yes Bank. The Reddy family’s entire MIAL shareholding is pledged with these banks. GVK’s promoters took the loans to finance an Australia project and the Bengaluru airport venture. 

ET was the first to report about the impending transaction in its edition dated April 8. 

“The funds brought in through this proposed transaction will help us deleverage as we continue with our endeavours to create the infrastructure for a strong aviation hub in India that will provide the impetus for growth and development for the entire country,” GVK chairman GV Krishna Reddy said. “Our future focus will be on delivering Navi Mumbai International Airport, successfully monetising Mumbai airport’s real estate and building a strong airports business at GVK.” 

The decision to court the sovereign wealth funds is being seen as an effort to bring in a white knight, feel people aware of the developments said multiple sources aware of the negotiations, when the stake sale exercise in the Mumbai International Airport Ltd (MIAL) had escalated into a full blown legal battle between GVK and its South African partner Bidvest earlier this month. 

GVK Airport holds a 50.50% stake in Mumbai International Airport Private Ltd (MIAL) that operates the airport in the financial capital and has the contract to develop a new airport in Navi Mumbai. According to a GVK filing in February, the airports unit had agreed to acquire an additional 13.5% stake in MIAL for around Rs 1,250 crore from Bid Services Division (Mauritius), increasing its stake to 64%. 

GVK hopes the two airport projects —MIAL as well as the proposed Navi Mumbai International Airport — would give it reasonably good valuation during the fundraising. 

The company said the transaction was subject to conclusion of confirmatory due diligence by ADIA and NIIF, agreement on definitive documents and customary closing conditions. 

Source: economictimes.indiatimes.com

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