GVK Power and Infrastructure an infrastructure conglomerate announced that it has signed an agreement to sell its 49% stake in airport business to Abu Dhabi Investment Authority (ADIA) and the National Investment & Infrastructure Fund (NIIF).
The move is likely to help the cash strapped group which is facing a take over threat from Gautam Adani who is interested in their Mumbai airport flagship. Earlier during the month of January, the Adani Group had made an offer to acquire 23.5% stake held by two South African companies and this genuinely prompted GVK to safeguard itself.
As per the term sheet, ADIA and the local fund will invest in GVK Airport Holdings by acquiring new shares. In a statement released on Thursday, the parent company noted that "All proceeds from the proposed transaction will be used by GVK towards retiring debt obligations".
The company has not disclosed any financial terms of the transaction but it stated that it was looking to raise the funds with an intention to trim down or refinance debt obligations of up to Rs 5,750 crores.
GVK Airports hold a stake of 50.50% in Mumbai International Airport Limited, which operates the airport in Mumbai and has a contract to develop a new airport in Navi Mumbai.
The ADIA and NIIF are likely to infuse funds through a combination of equity and debt, valuing Mumbai International Airport Limited (MIAL) at Rs 12,500 - Rs 13,000 crore as against Adani's offer of Rs 9,500 crores. They are also negotiating a structured debt instrument to induct Rs 3,500 crore of funds. GVK will be using the proceeds from these transactions to buy out two South African Joint Venture Partners Bidvest and ACSA from MIAL and also from the three existing lenders HDFC Bank, ICICI Bank and YES Bank. As of now the Reddy's families entire stake of MIAL is pledged with these banks. The promoters of GVK had taken loans from these banks to finance an Australian project and the Bangalore airport.
GVK's Chairman - GV Krishna Reddy stated that "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. Our future focus will be on delivering Navi Mumbai International Airport, successfully monetizing Mumbai airport's real estate and building a strong airports business at GVK."
Currently, Citigroup Global Markets India is acting as the financial adviser to GVK.