Gautam Adani’s conglomerate has halved its revenue growth target and plans to suspend further capital spending, according to people familiar with the matter, as the Indian billionaire seeks to restore investor confidence following a deadly short seller attack.
The group will now target 15% to 20% revenue growth for at least the next financial year, down from the 40% growth originally targeted, the people said, who did not want to be named as the discussions are private. . Capital expenditure plans will also be reduced, they said, as the group prioritizes strengthening its financial health over aggressive expansion.
The change shows how the power ports conglomerate is focused on conserving cash, paying off debt and recouping pledged shares as it scrambles to undo the damage from a scathing Hindenburg report Research on January 24. Although the Adani group denied the allegations of accounting fraud and stock market manipulation made by the American short seller, the scandal sparked a stock market rout that wiped more on $120 billion of the market value of the Adani Empire.
Withholding investments for as little as three months could save the conglomerate up to $3 billion – funds that can be deployed to pay down debt or boost cash flow, another person said.
The group’s plans are still under review and are expected to be finalized in the coming weeks, the sources said.
A representative for Adani Group did not immediately respond to an email seeking comment on its plan to lower the revenue target and delay capital spending.
“Inter-links”
“The scale and economic ties of Adani’s businesses make it relevant to discuss what any setback in the group’s investments could mean for the economy as a whole,” Barclays Plc analysts led by Avanti Save wrote in a February 10 report. “A disruptive outcome or a sharp decline in group investment could have implications for India’s investment cycle.”
Chief Financial Officer Jugeshinder Singh told a local journal last month that the Adani Group could cut capital spending as a follow-on share sale by Adani’s flagship company was underway amid Hindenburg’s accusations.
If the follow-up offer is not subscribed, “we will postpone the growth program for six to nine months and then we will do it later,” Singh told The Hindu Businessline in an interview published on January 29. The sale was discarded three days later, in the middle of the pressure with investors.
The retirement is a marked turnaround for a tycoon who has been on a rapid – and debt-fueled – expansion spree for the past few years, and reflects the significant impact Hindenburg’s onslaught has had on the conglomerate.
The first-generation entrepreneur, who started in an agricultural trading business in the 1980s, quickly built an empire that now spans ports, airports, coal mines, power plants and utilities . Over the past two years, it has made forays into green energy, cement, media, data centers and real estate, gaining significant leverage in a way that has afraid some credit watchers.
Soothe worries
In the days following the stock crash triggered by Hindenburg, Adani and his companies worked to ease the concerns of investors and lenders.
On February 1, flagship Adani Enterprises Ltd. sidelined the $2.5 billion follow-on stock offering – despite being fully subscribed the day before – as the tycoon sought to avoid embarrassing mark-to-market losses for its investors amid relentless stock selling. A few days later, the company canceled a retail bond sales.
The Adani Group has been focused on allaying concerns about its financial health and strengthening sentiment.
On February 6, the group said that Adani and his family prepaid loans worth $1.11 billion to release pledged shares in three companies as the ports unit announced plans on February 8 to repay 50 billion debt in rupees in the year beginning in April to boost a key measure of credit.
The conglomerate plans to prepay $500m bridge loan due next month after some banks balked at refinancing debt, Bloomberg News reported Wednesday citing people familiar with the discussions. This was part of a fundraiser last year to fund the acquisition of Holcim cement assets in India of Ltd.
Auditor of the big four
Adani Group plans to hire a Big Four auditor to ‘perform a general audit’, the French energy giant TotalEnergies SE said in a statement earlier this month while outlining its investments in India. This will help answer some of the red flags raised by Hindenburg.
The Indian conglomerate has hired public relations firm Kekst CNC as a global communications adviser, Bloomberg News reported on Saturday, citing people familiar with the matter. Kekst, according to his websitehas been involved in high-profile litigation, “working against some of the most aggressive counterparties”.
Attempts to calm investors’ nerves helped rally stocks early last week, but headwinds remain strong.
Sale of shares resumed after MSCI Inc. slashed the number of shares it considers freely tradable for four of the companies – a move that will see weights drop in its indexes. Moody’s Investors Service Friday cut off one’s prospects For Adani green energy ltd. and three other group companies citing the stock rout.
More shares in three Adani Group companies have been pledged, SBICaps Trustee said in a notice to Indian stock exchanges late Friday, “for the benefit of the lenders” of Adani Enterprises.
Learn how to navigate and build trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Register here.