Gautam Adani’s power unit is ending its $847 million acquisition of coal-fired power plants in India in a sign that the billionaire’s business empire is reducing spending after a brief seller strike.
The conglomerate of Indian tycoons, which includes India’s largest private thermal power producer, has been rocked by a stock market rout triggered by short sellers Hindenburg Research in New York, which last month released a report accusing the group of stock manipulation and fraud.
Adani strongly denied the allegations and insisted that the group’s debt pile was manageable. But so far it has failed to stop yields on bonds spiking and shares of listed companies plummeting – with its flagship Adani Enterprises tumbling to a minimum of Rs1,017 from a high of more than Rs4,000 in December.
“At the moment Adani Power is either halting or temporarily halting further capital expansion,” said energy economist Vibhuti Garg, South Asia director of the Institute for Energy Economics and Financial Analysis. “Any new investment will be carefully considered.”
“I also avoid building coal assets,” Garg added.
The Adani Group did not immediately respond to a request for comment.
Widely regarded as an ally of Indian prime minister Narendra Modi, Adani presents itself as the architect of the logistics and power generation networks that form the backbone of India’s growing economy.
But the retrenchment will mark a change in strategy for the 60-year-old, who built up conglomerates during the breakneck debt expansion, increasing profits by buying or building new projects ranging from solar power to airports.
Adani Power in August agreed to buy DB Power, a company that owns and operates profitable coal-fired power plants in the Indian state of Chhattisgarh, and its parent company Diliigent Power Private. The industrious owner also runs a newspaper business, the Bhaskar Group.
The Rs70bn ($847 million) cash deal, which was approved by India’s competition regulator in September, had a deadline of the end of October, which the company later extended four times.
But on Wednesday, the latest completion deadline, Adani Power said the parties had not exceeded the agreement’s deadline.
“The long stop date under the memorandum of understanding of August 18, 2022, has expired,” the company said in a stock market filing.
In its quarterly earnings announcement last week, some of Adani’s portfolio companies said they would reduce capital spending for the financial year starting in April.
“We will not make any new commitments ‘until we resolve this period of volatility,'” Adani Group chief financial officer Jugeshinder Singh said on an analyst call after Adani Enterprises’ quarterly earnings on Tuesday.
Singh confirmed that the project will now be completed on schedule, and offered analysts and investors a bus to check progress on the new airport near Mumbai, India’s financial capital.