3 key Mumbai projects under scanner after Adani stumbles
The ₹23,000 crore Dharavi Redevelopment Project, the ₹16,700 crore Navi Mumbai International Airport and the power distribution license for Navi Mumbai all under renewed scrutiny following market rout
Mumbai: In the commercial capital of India dominated by the big boys of Indian corporate world, Gautam Adani was seen as an outsider. It was only as recently as 2018 that he became a part of Mumbai’s charmed circle when he took over Anil Ambani’s thriving electricity distribution business in suburban Mumbai.
But within five years of his entry in the city, Adani’s conglomerate had taken over Mumbai’s airport, port, become a significant player in the city’s realty, power and infrastructure sectors. Now, with the company’s fortunes crashing (having lost over a 100 billion dollars in valuation in just 5 days) after the revelations of the Hindenburg report questions are being raised about the future of key projects in the helmed by Gautam Adani’s companies. These are: The Dharavi Redevlopment Project on 300 hectares of prime land in the heart of the city; the Navi Mumbai International Airport which is under construction, and is expected to start operation by end of 2024; and the plans to expand the electricity distribution business to Navi Mumbai which is the next boom town after the airport and the Mumbai Trans Harbour Link.
A top state official said speaking on condition that he not be named, said the government was watching the developments (related to Adani) closely, and the projects “that are yet to take off or are under implementation may get delayed due to the ongoing turmoil.” Financial institutions are yet to take a stand on funding these projects, he said before adding, “The funds that are already committed may come but projects which are yet to take off, for instance the Dharavi Redevelopment Project (DRP) may take some time to start.” The Maharashtra government was scheduled to sign the memorandum of understanding with Adani this month but increasingly that looks unlikely to happen, once again putting a spanner in the redevelopment of one of Asia’s largest slums.
Given the new financial disclosures by the Hindenburg report and the subsequent fall in the company’s valuation, Maharashtra Congress has demanded that the state needs to dump the company from DRP and also take a hard look at the ongoing construction of the Navi Mumbai international airport.
“The homes and small businesses of millions of poor people in Dharavi are now facing a crisis. Adani’s mismanagement has been exposed and the government should take away the Dharavi redevelopment project from them,” said Maharashtra Congress chief Nana Patole.
In December 2022, the group’s company Adani Realty won a global tender to redevelop Dharavi slums with a bid of ₹5,069 crore, rekindling hopes that one of the largest and complex urban renewal projects will finally take off the ground for the first time in 25 years. The project involves rehabilitation of nearly one million inhabitants of Dharavi including 60,000 residential and 13,000 commercial dwellers and redevelop 240 hectares of prime land in the heart of Mumbai over a 17-year span. A slew of concessions has been given for the project including 4 FSI, and Transferable Development Rights (TDR) which could be utilized by the developer anywhere.
The September 2022 government resolution which set the ball rolling on the global tender for Dharavi for the third time since 2006, specifies that within 60 days of the Letter of Award, the Adani group will have to set up a Special Purpose Vehicle (SPV) with at least three government nominees on it. Around the same time, the group will also have to sign an MoU with the Dharavi Redevelopment Project and Slum Rehabilitation Authority.
The previous conditions for the Dharavi project had envisaged the Lead Partner or the winning bidder to deposit ₹100 crore in escrow account and submit ₹400 crore as bank guarantee. However, the September 28 GR changed the condition to Lead Partner depositing 20 per cent of the bid amount within 90 days of LOA. At the same time, a development agreement and a shareholders’ agreement would be signed with equity infusion of ₹100 crore by the government into the SPV. Within 150 days after LOA, Adani group was to submit the integrated master plan along with 20 per cent of bid amount.
“This is a huge project and we cannot afford to have it halt midway. We will meet chief minister Eknath Shinde and deputy chief minister Fadnavis with our concerns,” said Varsha Gaikwad, Congress leader and MLA from Dharavi.
“Large infrastructure projects, including the Dharavi redevelopment project, will always be able to raise funding at a project level from financial and strategic investors. The Adani group already has a number of operating infrastructure assets, in the form of airports, power generation and distribution, etc. The cost of any new fund raise may increase marginally with time though,” said Shriram Subramanian, founder and MD of InGovern Research Services, a corporate governance advisory firm.
Apart from the DRP, the Adanis operate Mumbai international airport and have been constructing the Navi Mumbai international airport at an estimated cost of ₹16,700 crore. The project was taken over from the GVK group by Adani Airports. It also includes redevelopment of land adjoining the airport. In addition, Adani Airports also aims to make commercial utilization of the land which is at present occupied by Air India quarters and hangars at Kalina in the city’s western suburbs. The future work includes turning old terminal (T1) into a cargo terminal with entire passenger operations shifting to Terminal 2. It involves the complicated work of removing slums on the airport land which may take time and further cash infusion.
The work on the Navi Mumbai airport, initially started by GVK, is on in full swing after initial problems related to acquisition of land and environmental clearances. A top officer from City Industrial and Development Corporation (CIDCO) said, “At present, the work is on schedule. I don’t know about the future but the work has to be completed by December 31, 2024.’’ Asked if the CIDCO was wary of continued funding for the airport, the official said they do not expect any delays.
A spokesperson for Adani Airports said, “The current FPO situation does not impact any current operations and future plans of Adani Airports. We will continue to focus on timely execution and delivery of projects.”
Though the conglomerate has several other projects especially those related to real estate, the third key development which has come under scanner after this week’s developments is the company’s foray into power distribution outside the Western suburbs.
In 2018, Adani Power Limited took over the electricity distribution in Mumbai suburban and Mira Bhayander from Anil Ambani-led Reliance. Though he was in financial trouble by this time, the energy distribution business was a profit-making venture for Anil Ambani. Last year, Adani Electricity Mumbai Limited decided to expand its footprint beyond Mumbai suburbs and applied for distribution license for Navi Mumbai and Thane. Navi Mumbai especially is likely to witness rapid development once the new international airport is ready, and Mumbai Trans Harbour Link offering improved connectivity with south Mumbai gets operational. Adani’s offer to take over power distribution network there has met with stiff opposition from the employees of the state-owned electricity company. The proposal is at present under consideration of the Maharashtra Electricity Regulatory commission. A senior officer of the Maharashtra Electricity Regulatory Commission said, again on the condition of anonymity, “We will call for Adani’s creditworthiness while doing their evaluation. Our staff is doing its due diligence.”
When contacted, Kandarp Patel, CEO of the Adani Electricity Mumbai Limited said that the rout of the Adani shares will have no impact on their working.