Gautam Adani’s conglomerate has halved its revenue growth target and plans to hold off on fresh capital spending, according to people familiar with the matter, as the Indian billionaire seeks to rebuild investor confidence in the wake of a bruising short seller attack.
The group will now see revenue growth of 15% to 20% in at least the next financial year, down from the 40% growth it had targeted, said the people, who did not want to be named as the discussions were private. Capital spending plans will also be scaled back, he said, as the group prioritizes improving its financial health over aggressive expansion.
The shift shows how the port-to-power conglomerate is focused on conserving cash, paying off debt and taking pledged shares as it scrambles to undo the damage from the scathing report by Hindenburg Research on January 24. Although Adani Group denies allegations of accounting fraud and stock manipulation levied by American short seller, the scandal triggered the loss of shares that have removed more than $120 billion from the market value of the Adani empire.
Withholding the investment for as little as three months could save the conglomerate as much as $3 billion — funds it could use to pay down debt or add to its cash pile, others said.
The group’s plans are still under review and will be finalized in the next few weeks, the people said.
Adani Group representatives did not immediately respond to an email seeking comment on plans to reduce revenue targets and delay capital spending.
‘Interlinkages’
“The scale and economic inter-linkages of Adani’s business are relevant to discuss whether the pullback in the group’s investment can entail for the economy as a whole,” Barclays Plc analysts led by Avanti Simpen wrote in a February 10 report. “Disturbing results from the situation or a sharp pullback in group investment could have implications for India’s capex cycle.”
Chief Financial Officer Jugeshinder Singh told a local newspaper last month that the Adani group could scale back capital spending, as a stake sale by its flagship company Adani took place amid Hindenburg’s allegations.
If the follow-up offer fails to get subscriptions, “we will postpone the growth program for six to nine months and then do it later,” Singh told The Hindu Businessline in an interview published on January 29. The sale was scrapped three days later. , amid pressure from investors.
The retreat is a marked change for the tycoon who has been on a rampage of expansion – and debt – for the past few years, and reflects the significant impact of the Hindenburg attack on the conglomerate.
The first generation of entrepreneurs, who started with agricultural trading companies in the 1980s, quickly built an empire that now spans ports, airports, coal mines, power plants and utilities. In the past few years, it forayed into green energy, cement, media, data centers and real estate, taking considerable influence in a way that spooked some credit observers.
Reduce Anxiety
In the days following the stock crisis triggered by Hindenburg, Adani and its companies have been working to solve the problems of investors and lenders.
On February 1, the flagship Adani Enterprises Ltd. abruptly rejected a $2.5 billion stock offer – despite having been fully subscribed the day before – as the tycoon sought to stave off embarrassing market losses for investors amid the ongoing rout. sell shares. A few days later, the company canceled the sale of retail bonds.
Adani Group has focused on staving off concerns about financial health and support up sentiment.
On February 6, the group said Adani and its family paid $1.11 billion in prepaid debt to release pledged stakes in three companies, while the port unit announced plans on February 8 to pay off 50 billion rupees in debt in the year from April to increase main credit. metrics.
The conglomerate plans to prepay a $500 million bridge loan due next month after several banks canceled the loan, Bloomberg News reported Wednesday citing people familiar with the discussions. It was part of last year’s fundraising to finance the acquisition of Holcim Ltd’s Indian cement assets.
Big Four Auditors
Adani Group plans to hire Big Four auditors to “do a general audit,” French energy giant TotalEnergies SE said in a statement earlier this month when describing its investment in India. This will help overcome some of the red flags raised by Hindenburg.
The Indian conglomerate has hired public relations firm Kekst CNC as its global communications advisor, Bloomberg News reported, citing people familiar with the matter. Kekst, according to the website, has been involved in high-profile court cases, “working against some of the most aggressive partners.”
Efforts to calm investor nerves helped rally stocks early last week but headwinds remain strong.
Stock sales continued after MSCI Inc. reducing the number of shares considered freely tradable for four companies – a move that will result in a lower weighting in the index. Moody’s Investors Service on Friday cut the outlook for Adani Green Energy Ltd. and three other group companies that declared losses in the stock.
Other shares in the three Adani Group companies were pledged, SBicaps Trustee said in a notice to the Indian exchange last Friday, “for the benefit of creditors” of Adani Enterprises.
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