Investors Serve Legal Notice Against GVK and Adani’s Airport Deal

As a major setback to Adani Group’s plans to acquire 74% stake in Mumbai International Airport (MIAL) from the cash-strapped GVK Group, a consortium of investors -- UAE’s Abu Dhabi Investment Authority (ADIA), India’s National Investment and Infrastructure Fund (NIIF), and Canada’s Public Sector Pension (PSP) Investments -- have served legal notice to the GVK group, saying the stake sale in MIAL would be a breach of the agreement they had signed last year.

GVK group has been opposing Adani group’s attempts to acquire a minority stake in MIAL since March last year but in a turn of events, the group has recently began talks with Adani to sell its own stake as it came into the radar of Central Bureau of Investigation (CBI) and Enforcement Directorate in July which are currently probing money laundering allegations against the group to the tune of Rs 705 crore.

GVK Group holds 50.5% stake in MIAL, followed by 26% by the national airports operator Airports Authority of India, 13.5% by South Africa’s Bidevest and remaining 10% by Airports Company of South Africa (ACSA). MIAL, in turn holds 74% stake in the Navi Mumbai Airport Project which is yet to be constructed.

In October last year, the consortium had signed a binding deal with GVK Group to acquire 79% in GVK Airport Holdings for Rs 7,614 crore. However, reportedly, the deal was challenged in court by the minority stakeholders of MIAL, Bidvest and ACSA.

“Our clients have expressly confirmed that they have not terminated and are not looking to terminate the binding agreement with GVK. The binding agreement is valid till January 27, 2021, and any binding agreement with the Adani Group would be a breach of the agreement, which is still in effect,” said the notice, sent by the consortium’s legal firm AZB Partners to the promoters of GVK Group and its lenders consortium, including State Bank of India, HDFC Bank, ICICI Bank, Axis Bank, Goldman Sachs India and Punjab National Bank.

Also read: Watchdog to Probe Abrupt Exit of Audit Firms from GVK Group

Meanwhile, the Financial Express, citing sources, has reported that the GVK Group’s lender banks have reportedly red flagged MIAL account as a fraud account and have appointed Deloitte to conduct a forensic audit of MIAL.

Owing to its fund crisis, GVK group has been struggling to begin the construction of Navi Mumbai Airport, in spite of winning its bid in February 2017 and also failed to acquire the 13.5% MIAL stake held by Bidvest since January 2019.

Adding to its financial difficulties, the CBI and ED probe which was based on an anonymous letter has perhaps pushed the GVK Group to submit to its earlier rival Adani Group. Last year, GVK Group had approached Bombay High Court and later an arbitration tribunal to stop Adani from acquiring Bidvest’s stake in MIAL.

According to the First Information Report filed by CBI, the group’s promoters allegedly under reported revenue of MIAL by entering into fraudulent contracts with related parties and meeting their personal and family expenses using MIAL funds, which caused a massive loss to AAI.

While Adani Group’s quest to get hold of the operations of Mumbai Airport and the Navi Mumbai Airport now hangs in balance, its new interest in airport operating business became evident when it aggressively bid and won to operate airports in Thiruvananthapuram, Lucknow, Jaipur, Ahmedabad, Mangaluru, and Guwahati through the public-private partnership (PPP) model.