New Delhi: The promoters of the Adani Group have prepaid loans worth $1.11 billion (approximately Rs 9,200 crore) on Monday, February 6, thus releasing pledged shares ahead of their maturity of September 2024.
The Adani Group will release equity shares in three companies – Adani Green Energy, Adani Ports, and Adani Transmission, according to a company statement.
The decision was taken in light of the “recent market volatility and in continuation of the promoters’ commitment to reduce the overall promoter leverage backed by Adani listed company shares”, the statement said.
A pledged share is used as collateral for taking a loan. Pledging of shares is one of the options that the promoters of companies use to secure loans to meet working capital requirement, personal needs and fund other ventures or acquisitions.
If the share price continues to fall, then promoters have to top up with more and more shares to balance out the collateral value.
According to the statement, Adani Ports & Special Economic Zone represented 12% of the promoters’ holding, Adani Green Energy had 3% of promoters’ holding, and Adani Transmission 1.4%.
The move was meant to reassure investors and led to a 25% jump in the share price of Adani Enterprises.
Moneycontrol reported, citing stock disclosures, that in September 2022, the Adani Group pledged entire stakes in Ambuja Cements (63.2%) and in ACC (56.7%), worth about Rs 96,800 crore, after acquiring both the cement companies from Switzerland’s Holcim Group.
However, data as of December-end indicated zero promoter pledge, the report said.
Meanwhile, it’s important to take a look at the firm’s overall debt levels.
Adani Group’s debt levels – as the firm borrowed money to fund acquisitions and expansion – doubled from Rs 1 lakh crore to Rs 2 lakh crore in the past three years, Mint reported. The overall bank debt increased by more than 25%, the report said, citing global brokerage firm CSLA. It added that bonds, financial institutions, and foreign banks form a larger part of it.
PSU banks have 30% of group debt, which has not increased in the last three years, CSLA said.
Adani Group has a consolidated gross debt of Rs 1.9 lakh crore and net debt of Rs 1.6 lakh crore, which is spread across group companies. The top three companies by net debt levels are Adani Green Energy, Adani Power, and Adani Ports and SEZ with Rs 30,000-40,000 crore in net debt each.
The CLSA report said that over the financial year 2016 and 2022, net debt levels have risen from Rs 0.7 lakh crore to Rs 1.6 lakh crore reflecting capex in group companies.
Also read: The Adani Group Crisis and the Projects in South Asian Nations
“By traditional metrics they are definitely overleveraged [having taken on too much debt],” Brian Freitas, founder of Auckland-based Periscope Analytics, told the Financial Times. “The question is whether their underlying businesses can grow fast enough to service the debt.”
The group, led by billionaire Gautam Adani, has been roiled by days of market turmoil after Hindenburg Research on January 24 alleged it had engaged in stock manipulation and used tax havens. It also said the group had unsustainable debt.
The selling pressure in its stocks forced the company to shelve a Rs 20,000-crore share sale on February 1.
Adani Group’s valuations have nearly halved since the release of the report. Adani also dropped out of the list of the world’s top 10 richest people.
Adani has denied the allegations, calling them “malicious”, “baseless”, and a “calculated attack on India”. It further said that it plans to take legal action against Hindenburg Research. The US short seller welcomed the plan, saying it will demand documents in legal discovery process if the group files a lawsuit in the US against the short seller.
S&P Global Ratings slashed its outlook on Adani Group to negative. Moody’s said that the group’s ability to raise capital has likely been impacted by “adverse developments. However, Fitch said there’s no immediate impact on the credit profile of the group companies it rates.
On Tuesday, February 7, Adani Enterprises gained 14.63% to close at Rs 1,802.50 apiece on the BSE.
Four out of nine Adani stocks ended in the red.
Adani Ports and Special Economic Zone was up 1.33%, Adani Wilmar (4.99%), ACC (1.32%) and Ambuja Cements (1.12%) on the BSE.
Adani Power was down 4.99%, Adani Transmission (0.77%), Adani Green Energy (5%), and Adani Total Gas (5%) on the BSE.
Sensex was down 220.86 points, or 0.37%, to close at 60,286.04. Nifty was down 43.10 points, or 0.24%, to close at 17,721.50.