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Tuesday, March 21, 2023


Adani Group Trims Capex, Founders Prepay Borrowings, Bond Sale Shelved To Restore Confidence

Indian billionaire Gautam Adani’s indebted conglomerate trimmed capital spending, prepaid borrowings on borrowed shares, and shelved a bond sale to mitigate continued investor fears of a possible default, according to Bloomberg.  

Adani’s companies have seen market values halved since Hindenburg Research published a report on Jan. 24 accusing the conglomerate of stock manipulation and accounting fraud. Adani has denied wrongdoing and threatened legal action. 

After returning investor funds last week from a withdrawn equity offering, Adani has reduced capital spending plans in some businesses, according to Bloomberg, citing the Indian business news website Mint. 

The Indian group could moderate its capex plans in some businesses and target growth over 16-18 months, rather than 12 months previously, one of the people told Mint. It will also use alternative sources of funding, including internal cash, so-called promoter equity funding and private placements to invest in projects, according to the report. 

Separately, Mint reported that Indian banks will continue to let Adani Group draw on unused credit lines to avoid sparking a default, citing unidentified bankers. The newspaper estimated that the group has about $1.5 billion of unused credit with domestic banks. –Bloomberg

To further restore investor confidence, Adani and his family have prepaid $1.11 billion of borrowings backed by shares of the Adani Group companies. The move is to mitigate investor fears and halt a three-week stock rout. 

The founders’ early payment will help release 11.77 million shares in Adani Transmission Ltd., the group said in a statement Monday. As many as 168.27 million shares of Adani Ports & Special Economic Zone Ltd. will be released along with 27.56 million shares of Adani Green Energy Ltd. –Bloomberg  

Eight of Adani’s companies fell in Mumbai trading today. Adani Enterprises slid as much as 10% before paring the decline to about 1%.  

Meanwhile, Indian lawmakers and regulators are attempting to calm fears and prevent a spillover of Adani’s conglomerate into other segments of financial markets. 

Prime Minister Narendra Modi has been silent about the turmoil. Still, officials from his administration said regulators, including those from the Securities and Exchange Board of India, are dealing with the fallout. The country’s central bank ensured financial firms were within limits on Adani Group exposure to prevent systemic risks. 

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