Monday March 27, 2023

Adani to repay $1.1bn share-backed loan early in bid to stem crisis

February 07, 2023

NEW DELHI: Indian tycoon Gautam Adani and his family have posted funds to repay a $1.1 billion loan backed by shares in several of his companies, as the billionaire battles to arrest a crisis that has wiped more than $100 billion off the value of his business empire.

One of India’s most powerful moguls, whose businesses span ports to energy to airports, Adani has been left reeling since US short seller Hindenburg accused the group of stock price manipulation and accounting fraud. Adani has denied the allegations.

In a statement on Monday, the Adani Group said that its founder and his family — majority shareholders in the Adani companies and known as promoters in India — had posted the funds to repay a $1.1 billion loan that was not due until September 2024. The loan was from a series of banks including Citibank, JPMorgan, Deutsche Bank, Barclays and Japan’s SMBC Group, an official for the Adani Group told the Financial Times.

All the banks declined to comment. The pressure on Adani’s 10 listed companies has been intensified by the knowledge that shares in the groups were pledged as collateral for loans. Bombay Stock Exchange data shows that the SB Adani Family Trust pledged stock as collateral across several of the listed companies.

The Adani Group had not responded to questions about which specific entity had received the loan by time of publication.

Adani said that early repayment of the loan would release 168 million shares in Adani Ports, 27 million in Adani Green Energy and 12 million in Adani Transmission. The share totals accounted for 12 per cent, 3 per cent and 1.4 per cent of Adani’s holding of the listed companies, respectively.

Samir Arora, founder of investment firm Helios Capital, said that by repaying the loan early Adani was trying to demonstrate the financial strength of his empire. “He’s showing you I have $1.1 billion just lying around to give back to you,” said Arora. “It shows they’re not in so desperate a state”.

While Adani has issued a lengthy rebuttal of Hindenburg’s allegations, that has done little to stem the crisis engulfing the group.

Since the allegations were published on January 24, the sell-off in Adani’s listed businesses has lopped Rs9.4 trillion ($114 billion), or about 50 per cent, off their value. In its statement on Monday, the Indian group said that it was making the repayment early “in light of recent market volatility and in continuation of the promoters’ commitment to reduce overall promoter leverage backed by Adani Listed Company shares”. It said promoters had given “assurance” to “pre-pay all share-backed financing”.

Shares of flagship business Adani Enterprises, which was forced to pull a $2.4 billion follow-on share sale last week, have fallen 54 per cent since the report was released.

Adani has sought to reassure investors that it was not under pressure to cover losses on share-backed loans extended to its businesses, dismissing claims circulating in Indian media to that effect as “market rumours”.

Adani, widely regarded as an ally of prime minister Narendra Modi, is coming under increasing political pressure. MPs from the Congress party and other opposition groups staged a protest on the grounds of parliament in New Delhi on Monday, demanding that Modi’s government allow lawmakers to discuss the Adani affair.

For a third working day running, parliament — which is controlled by Modi’s Bharatiya Janata party — adjourned without any discussion taking place.

Opposition lawmakers chanted “Adani government down” and “Adani government shame” and “Stop pillaging the poor.” The intensity of Adani shares’ sell-off has prompted Indian authorities to try to calm investors.

The Securities and Exchange Board of India said over the weekend that it was aware of “unusual price movement in the stocks of a business conglomerate” and vowing to examine and take “appropriate” action “if any information comes to SEBI’s notice”. The regulator did not name Adani.