Gautam Adani's ports unit is considering to repay about 50 billion rupees ($604.6 million) of loans, as the beleaguered Indian tycoon seeks to trim debt after a short seller attack put his empire's financial health and corporate governance under scrutiny.
Adani Ports & Special Economic Zone Ltd. is mulling total loan repayment and prepayment of that amount in the year starting in April, which would improve net debt to earnings before interest, taxes, depreciation, and amortization ratio to about 2.5 times, it said in an earnings statement Tuesday. The ratio stands at just over 3 times currently.
India's largest private sector ports operator, which reported an earnings miss in the latest quarterly earnings, also said it would roughly halve its capital expenditure next financial year, compared with the current year.
These developments come just a day after a group statement saying the billionaire and his family prepaid $1.11 billion worth of borrowings backed by shares in three group companies, including Adani Ports, to allay investor fears. Two other firms of the ports-to-power conglomerate that reported earnings on Tuesday showed strong growth in profits, also potentially soothing nervous traders.
In another potential sign of encouragement, people familiar with the matter said Oaktree Capital Management, one of the world's largest opportunistic debt firms, and Davidson Kempner Capital Management were among those scooping up bonds related to the Adani empire in recent weeks.
The conglomerate's finances have come under scrutiny after US short-seller Hindenburg Research levied accusations of accounting fraud and market manipulation at the Adani Group, wiping more than $100 billion from its market capitalization.
Adani Group has repeatedly denied the charges.
"To uphold the principles of good corporate governance, the management of Adani group entities are considering the appointment of independent firms/agencies" to look into the issues of regulatory compliance around related party transactions and internal controls, among others, according to filings from the firms, Ambuja Cements Ltd. and Adani Green Energy Ltd.. "The management will assess the necessary actions required, if any."
The Adani Ports guidance "could ease concerns around the firm's liquidity and debt, though governance and regulatory risks are likely to linger," Bloomberg Intelligence analyst Sharon Chen wrote. "This could also offer assurance that it might not materially increase related-party loans to support the rest of the group, as free cash flows have been earmarked for debt repayment."
Listed firms of the Adani conglomerate, which was forced to shelve a $2.5 billion share sale by its flagship Adani Enterprises Ltd. last week as the short seller's allegations triggered a massive stock rout, have begun reporting December quarter earnings this week as investors look for cues on the robustness of the companies' operations.
Adani Ports reported a 16% drop in profit to 13.2 billion rupees for the latest quarter, missing the analysts' estimate of about 15 billion rupees. Revenue rose 18% from the year-ago period to 47.9 billion rupees but also fell short of the estimates. Capital spending for the year starting April is pegged between 40 billion rupees and 45 billion rupees.
Profit at Adani Green Energy, one of the most levered companies in the conglomerate, more than doubled to 1.03 billion rupees, up from 490 million rupees in the same quarter last year. Total income surged 54% to 22.6 billion rupees while total costs rose 45%, the company said in an exchange filing. The renewables firm is on track to complete 8,300 megawatts of capacity by March, it said, adding that bond covenants are within stipulated limits.
Ambuja Cements, the larger of the two local cement makers that Adani Group acquired last year from Holcim Ltd., posted a larger-than-expected quarterly profit at 3.69 billion rupees, up 46% from the year-ago period. Revenue rose 10% and matched estimates at 41.3 billion rupees, according to a separate filing.
The cement maker remains debt-free and expects "cement demand to further grow in coming quarters on the back of increased infrastructure activities," its Chief Executive Officer, Ajay Kapur, said in the filing.
Adani Transmission Ltd. posted an earnings beat on Monday as net income surged 78% - the only other group firm that has announced its results so far.
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