Adani Enterprises to prepay US$130m of debts to win investor confidence

Adani Enterprises has declared that it will prepay its debts worth $130m which are due in mid-2024, in an apparent bid to boost investor mood.

Gautam Adani

India’s controversial port-to-power conglomerate Adani Enterprises has said it will prepay US$ 130m of debts, in an apparent move to boost investor confidence after its stocks nosedived following allegations of stock market manipulation by the US-based shortseller Hindenburg Research.

In April, Adani Ports and Special Economic Zone (APSEZ), the conglomerate’s company in the ports business, floated a tender to buy back $130m of its July 2024 bonds in each of the next four.

In March, Adani Enterprises, the apex company of the conglomerate, said in a statement, “In continuation of promoters’ commitment to repay the promoter leverage, Adani has completed full prepayment of margin linked share backed financing aggregating to USD 2.15 billion, well before committed timeline of 31 March 2023 (sic).”

The group claimed then that its promoters have also prepaid a $500m “facility taken for Ambuja acquisition financing”. Adani Enterprises claimed that this prepayment is in line with its promoters’ “commitment to increase equity contribution”. It claimed that the promoters have infused $2.6bn out of the total acquisition value of $6.6bn for Ambuja and ACC.

Adani Enterprises also announced that its controversial founder-chairman Gautam Adani has been reappointed by its board as the Executive Chairman for five years from December 1st 2023. Adani’s current tenure as the chairman was ending on November 30th 2023.

The conglomerate released the financial results of the fourth quarter (Q4) and the annual report for the financial year (FY) 2022-23 recently. According to the report, Adani Enterprises’ consolidated profit for FY 2022-23 increased threefold year-on-year (YoY) basis to Rs 24.73bn, while it has posted a revenue surge of over 97% to Rs 1.37 trillion.

According to the company’s Q4 report, its consolidated net profit for the quarter rose by a whopping 137% YoY to Rs 7.22bn and its revenue from operations increased 26% YoY to Rs 313.46bn. Adani Enterprises’ earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 157% to Rs 39.57bn.

These results have been a saviour for the controversy-hit conglomerate, as it suffered a market capitalisation loss of over $100bn. To combat the severe effects, Adani Enterprises have been trying to reduce its debts and pledged its promoter shares.

Although the conglomerate has not achieved its target of pacifying the share markets, it managed to get a Rs 154.46bn secondary equity investment from GQG Partners owned by Rajiv Jain, reportedly close to Adani. The infusion of this money into the group, which Jain claimed is due to its robust port and infrastructure businesses it owns, has helped it restore stock stability.

Because of these developments, it will be a very tightrope walk for the Adani Group with its new offer to prebuy its debt bonds. It is to be seen whether it can increase the investors’ confidence in the conglomerate.

However, the stain of the allegations levelled by Hindenburg Research doesn’t seem to vanish soon. The Stock Exchange Board of India (SEBI) has agreed to investigate the allegations against Adani Enterprises, following the demand raised by India’s Opposition.

The Opposition in India has alleged that Adani Enterprises has been running its alleged malpractices with sheer impunity due to the closeness between its chairman and Prime Minister Narendra Modi. Adani has denied receiving any favours and claimed all his businesses are fair and abide by the law.

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