Adani in talks to pre-pay share pledges to boost confidence

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(Feb 3): Embattled billionaire Gautam Adani is in talks with creditors to pre-pay some loans backed by pledged shares, as he seeks to restore confidence in his sprawling conglomerate’s financial health.

An Adani Group representative said on Friday (Feb 3) the company is in talks with creditors proactively, confirming an earlier Bloomberg News report. While the official didn’t elaborate further, the move would see lenders release some of the stock pledged as collateral, and repayment could take place as early as this weekend, people with knowledge of the matter, asking not to be identified as the details are private.

The conglomerate, with interests spanning cement, media, ports and power, has pledged 5.5% of its listed units’ shares overall in loans, the people said.

While there’s been no suggestion that Adani Group entities would struggle to make dollar debt payments due soon — and the firm has flagged interest coverage ratios that show it has the ability to meet such obligations — the move is an attempt to restore confidence after some banks stopped accepting the conglomerate’s securities as collateral in client trades.

However, the prepayment itself might not be enough to bolster confidence, according to Sameer Kalra, the founder of Target Investing in Mumbai. Investors want “concrete plans and actions”, he said. “The use of every rupee on the balance sheet is critical now. There are a lot of stakeholders.”

Adani Group hasn’t faced margin calls on these pledges and is seeking the prepayment proactively, the people said.

Stock meltdown

The conglomerate’s 10 stocks all fell in Mumbai trading on Friday, with more than half of their value erased since Hindenburg Research published a scathing report last week, one of the biggest wipeouts in India’s history.

The flagship company Adani Enterprises Ltd slumped as much as 35% — a record intraday plunge — while Adani Green Energy Ltd and Adani Transmission Ltd each fell 10%. Adani Ports and Special Economic Zone Ltd made payments on dollar bonds as scheduled on Thursday, a modicum of solace for investors shaken by the turmoil. All 15 dollar debt securities of the group also advanced on Friday.

Still, there remains considerable uncertainty over the group’s cash flow and fiscal positions after it withdrew a US$2.4 billion (RM10.24 billion) share sale this week, meant to inject liquidity and bring down leverage.

The key priority for the prepayment is to remove any concern about margin calls, the people said, adding that Adani officials will speak with investors in coming days and will make all payments on time.

Adani, who last year became the world’s second-wealthiest individual, has dropped out from the top 10 richest list since short-seller Hindenburg Research accused his companies of fraud to inflate revenue and stock prices.

Some market participants now see opportunities in the sell-off. Goldman Sachs Group Inc and JPMorgan Chase & Co have told some clients that bonds related to Adani can offer value due to the strength of certain assets.