Adani Group to prepay $1.1 billion share pledges to reduce leverage

The Gautam Adani-led ports-to-energy conglomerate plans to reduce the overall promoter leverage backed by shares of listed Adani Group companies in order to restore investor confidence amid the recent selloff triggered by short-seller Hindenburg Research.

"In light of recent market volatility and in continuation of the promoters' commitment to reduce the overall promoter leverage backed by Adani Listed Company shares, we are pleased to inform that promoters have posted the amounts to prepay $1,114 million ahead of its maturity of Sep 2024," the Adani Group says in a statement.

With the pre-payment of share pledges, 168.27 million shares of Adani Ports & Special Economic Zone, representing 12% of the promoters' holding, will be released in due course, the company says, adding that this is in "continuation of promoters' assurance to prepay all share backed financing."

Around 27.56 million shares of Adani Green Energy, representing 3% of promoters' holding, are expected to be released. About 11.77 million shares of Adani Transmission, representing 1.4% of promoters' holding, will be released, the company says.

Despite the clarifications about pre-payment of money to release the pledged shares, Adani Green, Adani Transmission, Adani Total and Adani Power were locked in lower circuits at the time of filing this report.

This comes at a time when New York University's finance professor Aswath Damodaran has pegged the valuation of Adani Enterprises at ₹945 per share. "A valuation of Adani Enterprises with upbeat assumptions on revenue growth and operating margins, and without factoring any of the Hindenburg accusations of fraud and malfeasance, yields a value of just about ₹ 945 per share," says Damodaran. Adani Enterprises has seen revenues rise over the last two decades, but profitability has lagged, partly because investments take time to pay off and partly because it is in low-margin businesses, he adds.

Meanwhile, the Reserve Bank of India (RBI) last week said the banking sector remains resilient and stable as per its current assessment. "There have been media reports expressing concern about the exposures of Indian banks to a business conglomerate. As the regulator and supervisor, the RBI maintains a constant vigil on the banking sector and on individual banks with a view to maintain financial stability. The RBI has a Central Repository of Information on Large Credits (CRILC) database system where the banks report their exposure of ₹5 crore and above which is used for monitoring purposes," the central bank said.

On Saturday, market regulator SEBI said it has put in place "a set of well defined, publicly available surveillance measures" to address excessive volatility in "specific stocks". It was the market regulator's first statement after several Adani Group stocks witnessed an "unusual price movement" since January 25.

"In all specific entity related matters, if any information comes to SEBI’s notice, then, as per extant policies, the same is examined and after due examination, appropriate action is taken," the capital markets regulator said.