We needed a strong financial partner who could do a deal quickly: GV Sanjay Reddy, GVK Group

After announcing an agreement for Mumbai International Airport, GV Sanjay Reddy Vice Chairman, GVK Group, responded to ET’s questionnaire on email on the deal dynamics, ED/CBI probe and the road ahead. Edited excerpts:

What exactly is the deal? At what valuation is the deal being done and what are the securities – will Adani pay equity, debt?

The transaction envisages an acquisition of GVK’s debt by Adani and our agreement to co-operate with Adani that involves allowing a right to convert the debt, standstill/release on our obligations, fund infusion by Adani in MIAL, etc. Adani has signed agreements with some of our lenders and are in discussions with the others.

There is no equity transaction agreed that provides a direct implied value for MIAL. Adani will also acquire the shareholding held by Bidvest and ACSA. That transaction, upon conclusion, can provide an imputed value but that deal has not closed yet. Therefore, at this stage it would be not feasible to assign a value to the MIAL transaction.

Why was the investor consortium deal terminated? What was their alternative proposal?

We worked with the Investors for over 18 months on a particular deal construct. Unfortunately, due to the mutiple recent developments, it became apparent that despite our best efforts, the transaction with Investors as executed and announced in October 2019 was not possible and was effectively frustrated. Our mutual efforts to find an alternate construct were unsuccessful.

Due to Covid and the deteriorating financial condition of MIAL, it was clear that we had to act fast. The lenders at MIAL had been forced to consider precipitative steps and the lenders to our holding companies were also evalauting various options.

We are not in a position to infuse the required liquidity and any delay in implementing a solution would also severely impact the lenders to our holding companies and other group companies. We would be seriously remiss in our obligations to our lenders, our partners, and indeed to the country considering the strategic nature of the projects and the essential service provided, if we did not implement an immediate and long-lasting solution, which was not possible with the Investors.

Given the conditions they had raised, the transaction stood abandoned in any case and we have now formally terminated the same. We had committed to our lenders to co-operate fully with them in finding a solution (with the full knowledge of the Investors) and, together with the lenders, we decided to go ahead with the Adani group.

The Investors have said that they continue to be interested in MIAL. Why would you not work with them?

We have the highest regard for the Investors. However, as mentioned above, not only was our original deal with them effectively rendered impossible, an agreeable alternate deal could not be arrived at. We need an urgent solution and we believe that our decision to co-operate with our lenders and Adani is the best solution.

You don’t expect them to litigate?

We see no reason for them to do so. It became clear that the construct they had proposed couldn’t be implemented for reasons beyond our control.

Will GVK continue to have any equity stake in MIAL?

Adani has signed agreements with some of GVK’s lenders and are in discussions with the others. The first step, therefore, is to complete the debt acquisition. In parallel, the process of approvals/CPs will initiate. Once this is completed, steps for debt conversion to equity will be completed. Eventually, this will entail a handover of controlling interest to Adani. At this stage any specific numbers cannot be provided.

Has Adani already acquired the MIAL debt as well as the GVK Airport Holdco debt? What is happening to the holdco lenders and then the opco lenders?

Adani has signed agreements with some of GVK’s lenders and are in discussions with the others. MIAL debt will not be acquired by Adani. Adani will infuse equity to provide financial support to MIAL.

For restructuring, SBI needs 10% equity in MIAL. Who gets diluted?

We are not aware of any such requirement for or from SBI.

About the ED / CBI investigations on GVK group which forced GVK to sell, what are your views on this matter?

These rumours are baseless. The Adani Group and GVK Group share a strong relationship. Our Investor deal took very long and COVID 19 had a very significant impact on our cash flows. We needed a strong financial partner who not only could do a deal quickly but had the financial ability to meet obligations of MIAL, NMIAL and also help settle our Lenders.

Adani which already has a presence in airports was a natural choice. Further, they already have an agreement to acquire 23.50% stake and demonstrated ability to move quickly. Adani will help settle debt at holding companies, infuse funds in MIAL and also commence construction of Navi Mumbai Airport. We are fully co-operating with the agencies and hope to settle this matter soon.

What next for GVK? What do you plan to do?

Notwithstanding this transaction, GVK will always be remembered for giving the city of Mumbai and India on of the best airports in the world. Our focus over the immediate future is to complete this transaction, our lenders are indeed provided with a solution and MIAL’s financial health is stabilised.

I also look forward to Adani achieving Financial Close for Navi Mumbai so that they can go about building a second marvel for the city of Mumbai, something I helped envision and design.

Once we are close to that point I will turn my mind to what next. There is a whole new world of opportunities and I just can’t wait to after them.