Adani group recovers from Hindenburg row, sells group shares to finance extension plans focusing on its airport business and green energy sectors
The Adani Group, one of India’s biggest diversified business empires, has stood firm despite the fallout of the Hindenburg research report early this year that accused the conglomerate of stock manipulation, accounting fraud and deceit. This report initially erased over $150 bn of Adani conglomerate’s value making its market capitalization dive drastically.
However, the group has been able to stage a remarkable comeback rebounding to a total market valuation of more than $200 bn by the second quarter of FY24.
In order to mitigate the effects of the Hindenburg crisis, the Adani Group aims to stabilize investor confidence, reduce its debt levels and seek funds for the aggressive expansion strategies that it had set out on. A great deal was achieved in the implementation of this strategy through the use of the divestment approach, which was an effort to sell some of the companies in order to fund capital. Adani Group in May 2023 decided to sell a minor stake of Adani Transmission and Adani Green Energy to the United state GQG Partners, Global equity investment firm. The investment agreement should be said to be around a $ 1.87 bn. Such a high figure of $1.87 billion was indeed a positive step to enhance the conglomerate’s liquid element. It was combined with other sales of stakes in Adani Ports and Adani Total Gas; and by mid- 2023 more than $ 3 billion was raised through stake sales. The group also secured $2 billion from International Holding Company-IHC of Abu Dhabi where the latter is to acquire 1%.
Now, the group is all set to resume its expansion plans with an ambitious $100 bn investment in multiple large projects over the next decade. The family sold around 3% stake in Ambuja Cements to raise more than $500 mn via block deals. Another sale of approximately $912 mn is expected soon for Adani Power, an electricity generation and distribution company. Adani Energy Solutions, an energy transmission company, raised $1 billion earlier this month via the sale of shares to a diverse range of investors, including insurance companies, sovereign wealth funds, U.S. utility-focused investors making their first foray into India, and Indian mutual funds.
In light of these investments, the Adani family is looking ahead to several new project launches including the Navi Mumbai international airport and green energy sectors. In addition, Adani Enterprises is also planning an IPO launch for its airport venture in the next 4 years.
Another strategy used in the recovery plan was flexibility in reducing the debts of the group. Non-interest bearing loans and other borrowing of the group as at 31st March, 2023 was approximately $27 bn. The company focused on the process of deleveraging to repay the high-cost debt and restructure the existing credits to easier terms. By July 2024, they had delineated its net debt position under $3 bn. This, they say, was made through the realizations from sales and investments of its stake, amounting to $ 3.5 billion. In addition to divestitures, the Adani Group undertook various forms of debt renegotiations including re-scheduling of the loans and the interest rates. This was important in order to stabilize the balance sheet and the cash flow necessary for current and future operations.
The ambitious Adani Group has been surviving for two decades because of its business model – the long-term development plan of the company is clearly shown in the infrastructure, renewable energy and logistics sectors. The amount generated through the sales of stakes, and refinancing has been planned for several significant projects. A major initiative launched recently is the upscaling of Adani Green Energy, which foresees a renewable power generation capacity of 45 GW by 2030, up from 20 GW by 2023. This would make Adani Green Energy among some of the biggest green energy firms globally, thus realizing the above-stated goals. The present arm of Adani Ports diversifies in logistical services in the future expansion of port facilities as well as integrated logistics parks throughout India and SouthEast Asia.
