Adani cuts growth target in half after attack by short seller Hindenburg
Gautam Adani’s conglomerate has halved its revenue growth target and, according to people familiar with the matter, plans to hold back on new investments as the Indian billionaire tries to rebuild investor confidence after a bloody short-seller attack.
The group is now targeting revenue growth of 15% to 20% for at least the next fiscal year, down from the 40% growth initially targeted, said the people, who asked not to be named as the talks were private. Capital expenditure plans are also being scaled back, they said, as the group prioritizes strengthening its financial health over aggressive expansion.
The shift shows how the ports-to-power conglomerate is focused on saving cash, paying down debt and reclaiming pledged stock as it scrambles to undo the damage from a damning Jan. 24 report by Hindenburg Research on accounting fraud and stock manipulation by the American short seller, the scandal sparked a stock market crisis that wiped more than $120 billion from the Adani empire’s market value.
Holding back on investments for just three months could save the conglomerate as much as $3 billion — funds that can be used to pay down debt or bolster cash on hand, another person said.
The group’s plans are still being reviewed and are expected to be finalized in the coming weeks, the people said.
A representative from Adani Group did not immediately respond to an email seeking comment on its plan to cut its revenue target and defer capital spending.
‘Links’
“The scale and economic interdependencies of the Adani companies make it relevant to discuss what a withdrawal of the group’s investments could mean for the economy as a whole,” wrote analysts at Barclays Plc, led by Avanti Save, in a report dated February 10th. “A disruptive outcome or a sharp drop in the group’s investments could impact India’s investment cycle.”
Chief Financial Officer Jugeshinder Singh told a local newspaper last month that the Adani Group could scale back capital spending as a follow-up sale of Adani’s flagship company is underway amid Hindenburg’s allegations.
If the follow-up offer is not drawn, “we will delay the growth program by six to nine months and then do it later,” Singh told The Hindu Businessline in an interview published on Jan. 29. The sale was halted three days later amid pressure from investors.
The withdrawal is a significant turning point for a tycoon that has been on a rapid — and debt-fuelled — expansion trajectory in recent years, and reflects the significant impact Hindenburg’s attack had on the conglomerate.
The first-generation entrepreneur, who started an agricultural trading company in the 1980s, quickly built an empire that now includes ports, airports, coal mines, power plants and utilities. In recent years, it’s ventured into green energy, cement, media, data centers and real estate, gaining significant leverage in ways that have spooked some credit watchers.
allay concerns
In the days after Hindenburg’s stock meltdown, Adani and his companies worked to allay concerns from investors and lenders.
On February 1st, the flagship Adani Enterprises Ltd. The $2.5 billion follow-up bid for shares came to an abrupt end — despite having been fully subscribed the day before — as the tycoon sought to avert embarrassing mark-to-market losses for its investors amid the inexorable stock sell-off. A few days later, the company canceled a private bond sale.
The Adani Group has focused on staving off concerns about its financial health and supporting sentiment.
On February 6, the group announced that Adani and his family received loans worth metric 1.11 billion.
The conglomerate is planning to extend a 500 million bridge loan, which is due next month. in India.
auditors of the Big Four
Adani Group plans to hire a Big Four auditor to “perform a general audit,” French energy giant TotalEnergies SE said in a statement earlier this month while describing its investments in India. This will help address some of the red flags raised by Hindenburg.
The Indian conglomerate has hired PR firm Biscuit CNC as its global communications consultant, Bloomberg News reported on Saturday, citing people familiar with the matter. Biscuit has been involved in high-profile litigation, according to its website, and “worked against some of the most aggressive counterparties.”
Attempts to calm investors’ nerves helped stocks recover early last week, but headwinds remain strong.
Share selling resumed after MSCI Inc. slashed the number of shares it considers freely tradable for four of the companies — a move that will result in lower weightings in its indices. Moody’s Investors Service lowered its outlook for Adani Green Energy Ltd on Friday. and three other group companies, citing the decline in share prices.
Other shares in three Adani Group companies have been pledged, SBICaps’ trustee said in a note to Indian bourses late Friday, “for the benefit of Adani Enterprises’ lenders”.
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