Adani Group Of India Intends To Demerge More Businesses While Dismissing Concerns Over Its Debt Levels

India’s Adani Group, led by billionaire Gautam Adani, has stated that it intends to spin off more businesses by 2028 and dismisses any debt concerns.

According to Chief Financial Officer Jugeshinder Singh, the corporate house intends to spin off or demerge its metals, mining, data center, airports, roads, and logistics businesses.

“The criteria is for these businesses to achieve a basic investment profile and experienced management by 2025-28, which is when we plan to demerge them,” he told a media briefing on Saturday.

Singh stated that the company is betting big on its airport business and hopes to make it the largest services base in the country outside of government services in the coming years.

In recent years, the Adani group has spun off its power, coal, transmission, and green energy businesses.

According to Forbes, Adani, the world’s third-richest man, has been diversifying his empire from ports to energy and now owns a media company.

Following a recent surge in the share price, Adani Enterprises’ flagship firm is set to raise up to $2.5 billion in a follow-on share sale, according to Reuters. Its stock increased by nearly 130% in 2022, but has since dropped by about 7%.

Other Adani group companies rose more than 100% last year, raising concerns among investors that the companies are overvalued.

However, some traditional valuation metrics, according to Singh, are irrelevant for businesses.

“We don’t look at P/E multiples for any of our businesses. For infrastructure businesses, the rate of return on assets deployed is relevant. Adani Enterprises works on a sum-of-parts model,” he said

According to the prospectus, the company is offering a discount of 8.5%-13% to entice retail investors.

“We don’t go to market if we are not sure of raising the full amount ($2.5 billion),” Singh said, adding that the company wants to increase the participation of retail investors and is aiming for a primary issue instead of a rights issue.

It has stated that the funds will be used to fund green hydrogen projects, airport facilities, and Greenfield expressways, in addition to debt reduction.

The group has traditionally incubated businesses within its flagship company, with the intention of demerging and listing them later. Its listed arms are currently active in industries such as ports, power transmission, green energy, and food production.

Singh dismissed analysts’ concerns about the company’s debt accumulation.

In the fiscal year ending March 31, 2022, Adani Group’s total gross debt increased by 40% to 2.2 trillion rupees. CreditSights, a subsidiary of Fitch Group, described the Adani Group as “overleveraged” and expressed “concerns” about its debt in September.

While some calculation errors were later corrected in the report, CreditSights stated that it remained concerned about leverage.

“Nobody has raised debt concerns to us. No single investor has. I am in touch with thousands of high net worth individuals and 160 institutions and no one has said this,” Singh said.

(Adapted from ThePrint.in)



Categories: Creativity, Economy & Finance, Entrepreneurship, Regulations & Legal, Strategy, Uncategorized

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