Adani group pulls out of M&As; plans to focus on debt prepayments

Apart from calling off buying Macquarie’s road assets, the Adani group has withdrawn from a series of acquisition opportunities, including of power plants, a retail firm, a power trader and road projects since January this year, say bankers. The focus of the group is to conserve cash and prepay debt rather than acquiring new assets.

“Till early this year, bankers would pitch every asset for sale with the Adani group. But now, the group is keen to expand their existing businesses, rather than acquiring stressed assets, so it is going slow on new acquisitions,” an investment banker said. 

Since January this year, the group withdrew from the race to acquire SKS Power, a stressed coal-based power plant in Chhattisgarh. In February, the group called off a plan to acquire DB Power’s thermal power assets at an enterprise valuation of Rs 7,000 crore. In the same month, it pulled out to make an offer to PTC India, a power trader. Later, the group did not make an offer for Future Retail after submitting its expression of interest to buy the asset via a joint venture company. On Thursday, Adani Enterprises announced that it will not go ahead with acquiring Macquarie group’s two road companies at an enterprise valuation of Rs 3,100 crore.

Bankers said the group’s absence from the acquisition race has given an opportunity to foreign private equity players, which are keen to buy into Indian infrastructure projects. Top officials of American private equity giants Blackstone and KKR said they were keen to invest in the Indian infrastructure projects which gives good returns.

In damage control

• Terminates agreement to buy Macquarie road projects
• Terminates contract to buy DB Power assets
• Does not submit offer for SKS Power
• Pulls out of race for PTC India, Future Retail

In the coming months, the group will focus on raising close to Rs 29,000 crore by selling shares in Adani Enterprises, Adani Transmission and Adani Green Energy and use the proceeds to prepay debt and fund its existing capacity expansion. The group may also look at listing its financial services arm Adani Capital. 

The group’s shares have recovered by 59 per cent from their February-end lows to Rs 10.35 trillion after a short seller Hindenburg Research report on January 24 pulled down the group’s stocks. A Supreme Court panel report, which found no regulatory shortcomings in the Adani probe, helped shares recover. 

In the last fiscal year, among the group companies, Adani Ports and SEZ completed six acquisitions, including Haifa Port Company in Israel, Gangavaram Port, Karaikal Port, IOTL, Ocean Sparkle, and ICD Tumb with an investment of around to Rs 18,000 crore in FY23. The ongoing financial year will be used to consolidate the operations.

Despite a record annual investment of about Rs 27,000 crore — it’s highest ever — AP SEZ maintained the net debt to Ebitda (earning before interest, tax, depreciation and amortisation) ratio at 3.1 times in FY23. In April this year, APSEZ also bought back of $130 million notes, which are due in June next year. The company will use the cash flows for more such buybacks in the coming quarters.

The family owned Ambuja Cements plans to expand capacity through organic route and is on track with the company giving orders for 14 capacity expansion. Last year, the group had acquired Ambuja Cement for $6.5 billion — making it one of the largest acquisitions so far.