Adani controls the largest private energy supplier in the emerging country.
(Photo: Reuters)
Bangkok The badly hit Indian conglomerate Adani is fighting for its future: After the stock market value dropped by more than 120 billion US dollars as a result of allegations of fraud, the powerful group of companies, which controls ports, airports, roads and the largest private energy supplier in the emerging country, among other things, hopes to win back trust with positive business figures – and apparently scaled back their ambitious growth plans.
CEO Gautam Adani presented the quarterly results of the central holding company Adani Enterprises, published on Tuesday, as proof of strength: The turnover of the company, in which Adani bundles a number of different business activities, rose by 42 percent in the last three months of 2022 compared to the previous year around $3.3 billion. Earnings before taxes, depreciation and amortization doubled to $238 million.
Multi-billionaire Adani was unfazed by the allegations of serious financial irregularities that have plagued his corporate empire since late January: “Our success is based on strong corporate governance, strict compliance with regulations, sustainable performance and solid cash flow generation,” he said Align press release. “Current market volatility” is only temporary, stressed the entrepreneur, whose private wealth has shrunk by $70 billion in the past three weeks, losing his title as Asia’s richest man as a result.
Stock still down more than 50 percent
Adani Enterprises, the main company in his group of companies, brings together, among other things, India’s largest coal trader, one of the most important solar cell manufacturers and the leading private airport operator on the subcontinent. In addition, the business with data centers, drone production and water infrastructure is also part of the company, which Adani sees as an incubator for new business ideas that can later be spun off as separate listed companies. Adani Enterprises owes the latest jump in profits primarily to increased margins in the coal business.
With the good figures, Adani managed to break through the long series of bad news, at least for the time being. Adani Enterprises shares ended trading on the Mumbai stock exchange up 1.9 percent. Compared to the previous month, the paper is still more than 50 percent in the red.
The price drop was triggered by a critical report by the US short seller Hindenburg Research, which described the Adani Group as one of the “most outrageous examples of corporate fraud”. The allegations relate, among other things, to a network of offshore companies which, according to Hindenburg’s suspicion, had been used for price manipulation and balance sheet falsification.
>> Read here: short seller Hindenburg Research reiterates allegations of fraud against Adani Group
Adani denies the allegations. Regardless of the accuracy of the allegations, the damage to the group of companies is enormous: the market capitalization fell by 127 billion dollars at times. The group withdrew a share placement that was supposed to bring in $2.5 billion at the last minute under pressure from the markets. In an effort to breathe air, Adani prepaid $1.1 billion in loans — with a $500 million payment on another loan to follow in March.
Growth plans are apparently being scaled back
The challenges remain great: The index provider MSCI decided last week to reduce the weighting of Adani shares – this could result in money flowing out of index funds. On Monday, the Indian Securities and Exchange Commission also confirmed that it had launched an investigation into the allegations and the recent fall in prices.
>> Read also: The parallels between the Indian Adani affair and Wirecard are astounding
As a result of the financial turbulence, Adani is now apparently facing a change of strategy. According to a media report, the times of extreme growth are at least over for the time being: Instead of a sales growth of 40 percent, the group is only aiming for growth of 15 to 20 percent for the coming fiscal year, reported the financial service Bloomberg, citing insiders. Planned investments should also be reduced accordingly. Last year, Adani announced investments of 100 billion dollars over the next ten years.
Adani’s personal wealth has shrunk by $70 billion in the past three weeks.
(Photo: Reuters)
“Once the market stabilizes, each entity will review its own capital markets strategy,” a group representative said on Monday. According to analysts, Adani’s far-reaching commitment means there are consequences that go far beyond the conglomerate. Economists at Bank Barclays recently warned that a sharp drop in Adani investment could impact the investment cycle across India.
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