The Adani Group appears to have huge plans for its airports maintenance venture. The group’s company floated for the airports business, Adani Enterprises (AEL), will be spending as much as ₹26,000 crore as capital expenditure in the next five years. The company has revealed the business plans.
The company has reported a loss of around ₹10 crore in the last quarter ended September 2019 while it had reported a profit of ₹79.6 crore in the same second quarter of the previous financial year 2018-19. The company had revealed that Adani Enterprises had forayed into natural gas exploration which was not successful and the company had to write off an amount of ₹129.73 crore on this account. This explained to loss on its books for the quarter.
The company will now have to find the means to raise the funds for such an ambitious investment /expenditure plan. The company says the funding plans will be finalised by March 2020.
The company has already signed some concession agreements with the Airports Authority of India for maintaining six airports. There are plans to add more airports to this list and this is a work in progress, AEL reveals. The revenue sharing agreements for different airports are yet to be signed, with varying ratios ranging from 60:40 to 65:35 and 70:30. Obviously, the ratio will be dependent on the volume of business generated at the specific airports.
Delving a little deeper into the results for the September quarter, the operating income has been reported at ₹540.47 crore and the operating margin, 6.38%. The year-on-year revenue stood at ₹8464.19 crore where the expenditure was ₹8,571.75 crore. AEL owes ₹10,580 crore as debts and of this amount ₹5,300 crore form term debts.
While the company has managed to bag contracts from AAI for many smaller airports, it is keen to own a pie in managing a large airport like Mumbai. There is an ongoing legal case and arbitration on Adanis’ attempt to acquire a 13.5% stake in Mumbai International Airport Limited (MIAL) from the South African investor Bidvest. The majority stakeholder in MIAL, the GVK Group has been trying to protect its turf and has blocked this stake sale and Adani has gone to the Bombay High Court on this. The case is still inconclusive.