Adani outbids rivals by wide margin to bag five airports

Ports-to-power conglomerate Adani Group, which now has aviation sector on its radar, was declared the highest bidder for five of the six airports opened for privatisation. The development comes just days after the infrastructure major showed interest in acquiring a stake in Mumbai airport.

Adani Enterprises Ltd won the bid for operation, management and development of airports at Ahmedabad, Jaipur, Lucknow, Thiruvananthapuram and Mangaluru. The bids for Guwahati airport are likely to be declared today.

"We would be aiming to scale up the infrastructure to bring these facilities on par with global standards," Adani group said in a statement.

According to government officials, this time, the bidding was based on per passenger basis instead of revenue sharing seen in earlier privatisation of Mumbai, Delhi, Bengaluru and Hyderabad airports. Also, the concession period is 50 years as against 30 years previously.

The six airports together carried over 20.6 million 5.1 million domestic and international passengers, respectively, for April to December 2018 period.

The executives from Adani Group refused to share information on the investment that will be required for these airports and the plans going forward. However, industry insiders aware of the details of the bidding claim that the winner is required to underwrite the investment already made by Airport Authority of India (AAI) in each of these airports apart from additional development costs that would be incurred for a period of over 15 years.

An analysis done by Mark Martin, founder and CEO of Dubai-based Martin Consulting, expects the underwriting costs to in Rs 850-1,250 crore range for each of the airports. Further, the airport developer is required to make an additional investment of around Rs 3,500-4,500 crore per airport over the decade-and-a-half. The experts claim that these airports are likely to get saturated within the next 15 years.

The Adani group, which recently forayed into real estate and power distribution businesses, has been circling airport assets. Adani Enterprises is believed to have shown interest in buying the 23.5% stake held by Bidvest and ACSA - two private equity partners of GVK Airport Ltd - in Mumbai airport. GVK, which has the first right of refusal, has agreed to acquire the 13.5% stake of Bidvest in order to keep Adani Enterprises at bay. Apart from that, the company has already lined up Rs 1,500 crore investment plan to upgrade Mundra airport in Gujarat to a full-fledged commercial aerodrome.

The details available with AAI reveal that Adani Enterprises offered Rs 177 per passenger for Ahmedabad airport. In contrast, the closest competing offer came from NIIF & Zurich Airport International at Rs 146. GMR Airports, which operates a number of airports across the globe, offered Rs 85.

Similarly, for Jaipur, Adani offered Rs 174 per passenger, while the nearest rival NIIF & Zurich Airport stood at Rs 155 per passenger. For Lucknow, Adani Enterprises's bid was Rs 171 per passenger as against Rs 139 per passenger quoted by AMP Capital. For Thiruvananthapuram, Adani bid Rs 168 in comparison to Rs 135 offered by KSIDC.

Interestingly, GMR, the only other player to have bid for all the airports, put in bids much lower than Adani, with the difference for Mangaluru airport most stark. While GMR quoted Rs 18, Adani offered Rs 118. An official from one of the airports said, "After being so long in the business, GMR knows what to offer."

Industry sources said this time, the government wanted the privatisation process to get done at the earliest as previous instances saw opposition from employees, political groups and others. A lot of legal cases have already been filed against the government's move, the sources added.

Aviation consultancy CAPA estimates that to keep pace with the projected growth in airport traffic, up to $45 billion of investment will be required for airport expansion and construction in India by 2030.

Minister of State for Civil Aviation Jayant Sinha last year said the airport infrastructure sector is set to get around Rs 1 lakh crore in the next five years. Of that amount, around Rs 95,178 crore of investment is expected to come from private investments in the joint venture airports, creation of new terminals and development of greenfield airports. AAI has an annual terminal capacity of 155 million passengers, which it intends to raise to 300 million by 2026-27. The government has an outlay of over Rs 50,000 crore for developing greenfield airports.