Will Adani Group face challenges in fundraising after $600-million setback?

The Adani Group’s future fundraising prospects have become the talk of the town following serious allegations under US laws, including bribery and fraud linked to securing energy contracts. In response to these reports, Adani Green Energy, on Thursday, announced its decision to halt the planned issuance of $600 million in US dollar-denominated bonds, just hours after the allegations surfaced.

The total debt of Adani Group stood at Rs 2.4 lakh crore as of March 2024 against Rs 2.23 lakh crore a year ago two months after the Hindenburg Report was published in January 2023.

Will the fundraising be challenging for Adani Group from here onwards?

Narinder Wadhwa, Managing Director, SKI Capital said, “Adani’s response and withdrawal of bond issuance in light of the allegations reflect immediate financial repercussions, as the group faces growing challenges in accessing global capital markets amid heightened scrutiny. Such withdrawals indicate a defensive posture as the group focuses on mitigating damage. Future capital-raising efforts, especially internationally, could remain challenging.”
 
Meanwhile, Moody’s Ratings said it will look at Adani Group’s governance practices when assessing the ports-to-energy conglomerate’s ability to access capital in the aftermath of the indictment of the group head Gautam Adani on bribery charges.
 
“The indictment of Adani Group’s chairman and other senior officials on bribery charges is credit negative for the group’s companies,” Moody's Ratings said in a statement.
 
On the other hand, Arun Kejriwal, Founder, Kejriwal Research and Investment Services said, “Fundraising plans of Adani Group may not be impacted. They may raise funds from some other place. However, the implication will be that people may choose not to list on the US.”

Kranthi Bathini, Equity Strategist, WealthMills Securities said, “There will be definitely an impact on fundraising activity. However, Adani Group has experience in navigating tough times. This will definitely sail through, given the business model they enjoy in terms of long-term cash flow is concerned. The lending rates may go up for Adani Group, which may impact their margin in the short- to medium-term. However, they have a strong Ebitda to meet any type of short-term liquidity requirements are concerned.”

“Adani Group is best suitable for investors who have high-risk appetite. Investors can zero in on stocks like Ambuja Cements and Adani Ports for a longer term perspective,” Bathini said.

Meanwhile, the spokesperson of Adani Group stated that the allegations made by the US Department of Justice and the US Securities and Exchange Commission against directors of Adani Green are baseless.
 
“In light of these developments, our subsidiaries have presently decided not to proceed with the proposed USD-denominated bond offerings,” Adani Group said in a regulatory filing.

Following the development, the combined market capitalisation of Adani Group companies plunged by Rs 2 lakh crore to Rs 12 lakh crore on November 21. Shares of Adani Enterprises tanked 22%, while Adani Energy Solutions slipped 20%. Adani Green Energy settled 18.80% lower at Rs 1,146.40. Adani Power and Adani Total Gas declined 9% and 10%, respectively. On the other hand, the benchmark equity index BSE Sensex fell 0.54% to 77,155.

Meanwhile, shares of Australia-listed fund manager GQG Partners—which invested heavily in the Adani Group after the Hindenburg crash—led by Rajiv Jain, saw its stock tumble 20%. It held more than 1% stake in Adani Enterprises, Adani Ports, Adani Energy Solutions and Adani Green Energy as of September.