Adani Group’s proposed acquisition of maintenance, repair and overhaul (MRO) company Air Works has got delayed after a major shareholder in the target entity was forced into liquidation.
Sources told ET that a Memorandum of Understanding (MoU) signed between Air Works and the Adani Group to close the deal has already expired twice, and the latest deadline was set in Q4 of FY23.
Last October, Adani Defence Systems & Technologies – a subsidiary of the group – had signed an agreement to acquire Air Works for a total value of Rs 400 crore.
A person aware of the development said the deal has not been closed yet as the Punj Lloyd Group, which holds 23% stake in the company, went under liquidation as lenders failed to find a solution within the bankruptcy process.
“The MoU deadline has expired as Air Works has been unable to find a solution to the problem where Punj Loyd- one of their major shareholders – has gone into liquidation and the assets owned by it will be under a bank-driven process. This is taking time,” the person said, adding that the Adani group remains interested in the MRO firm.
Spokespersons at the Adani Group and Air Works didn’t respond to queries on the subject. The resolution professional of Punj Lloyd also declined to comment on the issue.
A person familiar with the situation said the deal is in the final stages and should be completed soon.
Listed entities of the Adani Group have lost more than $100 billion in market value over the past three months after US short seller Hindenburg Research accused the conglomerate of ‘misgovernance’, ‘fraud’ and stock price ‘manipulation’. The Adani Group has consistently denied those allegations.
Set up in 1951 by two friends P S Menon and B G Menon, Air Works has presence in 27 cities, including hangars in Mumbai, Hosur, and Kochi. Indamer Aviation, the oldest private MRO in the country, was set up in 1947.
The acquisition is supposed to give the infrastructure-to-aviation conglomerate an entry into the aviation maintenance sector, marking a natural extension of the Adani Group’s civil aviation portfolio.
The group has plans to expand the business in two ways— by acquiring more airports and moving into various segments of airport services, such as MRO, ground handling, and duty-free stores.
The Adani Group operates the Mumbai airport in addition to those in Ahmedabad, Lucknow, Thiruvananthapuram, Jaipur, Guwahati and Mangalore.
The Indian MRO industry size is expected to increase from $ 1.7 billion in 2021 to $4 billion by 2031, at a compound annual growth rate (CAGR) of 8.9%, said a report by Deloitte in November last year.
India’s airlines have typically had their aircraft maintenance requirements fulfilled overseas. The Centre has now eased taxation norms for the MRO sector. In March, it reduced the GST in domestic MRO services to 5% from 18%.
This has brought in new companies. In July, Safran Engineering, whose engines will power the largest number of Indian airliners in the next few years, said it is setting up an MRO facility in Hyderabad at an investment of up to $200 million. The government is also seeking to privatise AI Engineering Services by early next year.
