Gautam Adani’s ports business to repay $600mn in race to cut debt

Gautam Adani’s ports and logistics company has announced plans to pay off some $605mn of borrowing and cut spending, as the under-fire billionaire rushes to shore up investor confidence.

The company, the most widely traded in Adani’s business empire, has been hit by a brutal sell-off triggered by a short-seller report that highlighted Adani Group’s growing debt pile while alleging “brazen” accounting fraud and stock manipulation at the conglomerate, which ranges from logistics to airports and electricity.

Adani Group has strenuously denied the allegations, but the ensuing stock market rout knocked more than $110bn off the conglomerate’s market value. Shares in Adani Ports and Special Economic Zone (Apsez) are about 27 per cent lower than before US short seller Hindenburg Research published its report last month.

Apsez’s announcement comes a day after the Adani family said it had paid off a $1.1bn loan pledged against company shares about 20 months in advance.

“When your shares have fallen 70 per cent that obviously creates pressure,” said Anish Teli, managing partner at QED Capital Advisors in Mumbai. “Adani is wanting to appease foreign investors especially as he is trying to grow their image globally . . . they’re obviously trying to put that to rest.”

Alice Wang, Asia ex-Japan portfolio manager at Quaero Capital in London, said these actions “reflect the pressure to soothe investor unease about the group’s extremely high leverage, particularly in recently tighter liquidity conditions”.

Wang added that the moves also mirrored “the risks from loans backed by assets whose valuation multiples have far extended their fundamentals. Even after the 57 per cent drop from their peak, Adani Enterprises still trades at 255 times price to earnings”.

Karan Adani, Apsez chief executive, said on Tuesday: “We are considering total loan repayment and prepayment of around Rs50bn ($604mn)]” for the year ending March 2024.

He said this would “significantly improve” the company’s net debt to earnings ratio, which is at present 3 to 3.5 times earnings, and “bring it closer to 2.5 times by March [20]24”.

Apsez also said it would halve capital expenditure for the upcoming fiscal year to between Rs40bn and Rs45bn, from Rs86bn for the year ending this March.

Apsez is India’s largest private port company, controlling almost one-quarter of India’s cargo market, and is the jewel in Adani’s business empire.

Although third-quarter operational revenue was up 18 per cent year on year, rising from Rs40.7bn to Rs47.9bn, net profits fell year on year to Rs13.1bn, 16 per cent down on the previous year.

The company said the profit fall was because of bigger losses on foreign exchange compared with the same quarter in 2022. Its consolidated quarterly earnings before interest, tax, depreciation and amortisation, which excluded the foreign exchange impact, were up 15 per cent to Rs30bn.

Apsez expects earnings this year of between Rs122bn and Rs126bn.