- Indian infrastructure behemoth still struggles with fraud allegations by short seller
According to Nikkei Asia article published on February 17, 2023, Adani Group has called off a 70 billion rupee ($847 million) buyout of a coal-fired power plant operator crucial to the expansion of its electricity generation business in central India, signaling a cutback in spending after a short seller's criticism battered the conglomerate's market value and turned lenders cautious.
Adani Power agreed last August to buy DB Power. The Adani group member said at the time that DB had been operating facilities profitably, had long- and medium-term purchase agreements for 923.5 megawatts of its capacity, and logged revenue of 34.8 billion rupees for the fiscal year ended March 2022.
The deadline to close the deal was extended four times. But Adani Power said in a securities filing Wednesday that there would be no more extensions, noting that "we wish to inform that the long stop date under the memorandum of understanding dated August 18, 2022, has expired."
Adani Power is the largest private coal-based power producer in India, with an operational capacity of 13.6 gigawatts.
It is also heavily indebted, accounting for 16% of the conglomerate's total gross debt of 2.2 trillion rupees at portfolio companies. It needs to repay lenders 33.49 billion rupees between January 2023 and March 2024.
Adani Group had earlier called off a $2.5 billion fully subscribed secondary share sale by flagship Adani Enterprises when the company's shares fell 30% below the floor price of the offer after short seller Hindenburg Research alleged "brazen stock manipulation."
The New York-based short seller accused the group of skirting Indian regulations by employing offshore shell companies and investment funds tied to the group. Adani Group denied the allegations, describing them as "baseless" and a "calculated attack on India."
The Indian infrastructure behemoth has financed growth by pledging tens of millions of its shares for loans from lenders around the world as it sought to establish itself as a key player in India's push to develop world-class infrastructure.
Shares in group companies have lost more than $100 billion in market value since Hindenburg went public with its allegations in late January.
The group has played down concerns over its ability to repay debt. After facing a margin call, Adani prepaid $1.1 billion in stock-backed lending due to mature in September 2024.
But this was not enough to soothe lenders. Credit Suisse, Citigroup and Standard Chartered have reportedly stopped accepting Adani Group bonds as collateral for margin loans. Moody's Investors Service has cut its outlook on four group companies, and S&P Global Ratings on two.
Adani Group Chairman Gautam Adani had signaled earlier this week that the conglomerate may reduce borrowings.
"The current market volatility is temporary," he said, and the conglomerate "will continue to work with the twin objectives of moderate leverage and looking at strategic opportunities to expand and grow."
