Adani Group promoters won't take on debt to fund expansion, growth

'Measured growth' the new buzzword for the group

The promoters of Adani Group have decided they will not raise further debt on their books to fund the conglomerate’s expansion and growth, according to sources aware of the development.

It is part of their new “risk management” strategy, said sources, after the group’s market capitalisation plummeted following the Hindenburg Research report, which accused it of market manipulation.

However, they will continue to be “net lenders” to group companies when they require funds. The Gautam Adani-led promoter group recently paid back the entire $2.5 billion of loans taken by pledging its shares in the companies.

The buzzword for the group is to go for “measured” growth with companies having to meet certain parameters on revenue and EBITDA (earnings before interest, tax, depreciation, and amortisation) in relation to increase in debt.

This will help, said sources in the know, in bringing down the group’s debt to EBIDTA ratio from the current 3.1x to 2.5x within one and a half years. The group’s net debt has been estimated at Rs 1.98 trillion.

The criterion discussed with companies is that at group business level, while growth in revenue and EBITDA could be sustained at 22 per cent a year, debt should not grow more than 11 per cent per annum.

A spokesperson for the group declined to comment on any of the issues.

NEW GAME PLAN

• Group is open to identifying non-core businesses for sale to raise funds    
• May need $4-5 billion to fund its expansion plans
• Will keep away from EV space, but is working on setting up charging stations
• 5G launch delayed due to unavailability of equipment in millimetre band  
• Promoter group recently paid back the entire $2.5 bn of loans taken by pledging company shares

The group estimates it needs $4-5 billion to fund its expansion plans, which will come from internal accruals and more equity.

Three months after the company pulled out of the follow-on public offer of Rs 20,000 crore in Adani Enterprises after the hit it took due to the Hindenburg report, the board has called a board meeting to raise equity and other eligible securities once again.

The fresh funds, when raised, will be used to partly pay off debt and de-leverage the group and to expand businesses, especially in renewables and airport expansion. The group is also open to identifying non-core businesses and have not ruled out selling them. A final decision on this has not been taken.

On new areas, those aware of the group’s plans say it will keep away from the electric-vehicle (EV) space, but is working on setting up charging stations for EVs and other alternatives across the country.

On its newest business of telecommunications, sources reiterated their focus was only on enterprise. They said the group was planning to ask for an extension of the launch of their 5G service after buying spectrum in the millimetre band for use in enterprises and mostly for captive requirements.

Sources said the extension would be required because the equipment needed to power 5G in the millimetre band was not easily available with vendors and might take more time.