Adani chalks out comeback strategy after $132 billion Hindenburg route

The port-to-power conglomerate run by Adani – who used to be Asia’s richest man – is hoping to turn the narrative around with this playbook and after being accused of accounting fraud on January 24 by US-based Hindenburg Research Calming down jittery investors and lenders. , stock manipulation and other corporate governance lapses. The Adani Group denies these allegations.

Adani and his allies have been in damage repair mode ever since. In addition to a campaign to portray themselves as responsible borrowers with prepayments and timely repayment of loans, officials have also launched a series of meetings to pacify foreign bondholders, who have lost $8 billion in recent years. Was tapped by the tycoon for funding of over Rs.

Realizing the seriousness of the blow to its image, the group has brought on Kekst CNC as a global communications consultant, Bloomberg News reported on February 11. The public relations firm, co-headquartered in New York and Munich, is known for its work. As with other corporate blow-ups in recent years, such as WeWork Inc. in 2019. Valuation implosion of

A person familiar with the matter said Keckst’s mandate is to help the group regain investor confidence by providing proper context not only on Hindenburg’s allegations, but also on other concerns revolving around the fundamental strength of the business.

Kekst’s team is working with Adani’s C-suite and communications team, and putting them through a “situation room” — the firm’s term for simulated crises that include tweets at executives, calls from journalists and other stressful situations. There is a barrage of developments, said the person, who asked not to be named because he is not authorized to speak publicly.

The Financial Times, citing unnamed sources, reported that the Adani group has also engaged American law firm Wachtel, Lipton, Rosen & Katz to fight against the short seller’s claims. Wachtel is one of the most expensive US law firms and has experience defending clients facing attacks from shareholder activists.

A spokesperson for the Adani Group did not immediately respond to a request for comment. Kekst declined to comment, while Wachtel did not respond to requests for comment.

‘dull question’

“Even after the stock market bloodbath, Adani can still afford good lawyers,” said Bhaskar Chakraborty, dean of global business at Tufts University’s Fletcher School.

His comments show how the saga has moved beyond the group to cast a shadow over India’s ability to rival China as an investment destination, fueling speculation from billionaire investor George Soros that the country may ” It can also inspire “democratic revival”. Adani is considered. Being close to Prime Minister Narendra Modi, who has not directly addressed the issue but has lashed out at opposition parties who have questioned his relationship with the billionaire by highlighting corruption scandals of his past.

Narrative aside, investors say they’re watching two things: the group’s high leverage ratio and its ability to generate cash flow after losing $2.5 billion in fresh money from its divested share sale.

Adani management is taking steps to address these concerns. Bloomberg told bondholders on a call on Thursday that the goal is to reduce the group’s ratio of net debt to EBITDA by more than three times next year, citing people familiar with the matter.

Adani Power Ltd has also called off plans to acquire a coal plant project by DB Power Ltd in central India as part of the group’s overall effort to reduce capital expenditure and conserve cash.

Observers say more such steps may be needed to reverse the crisis.

The group has “some very valuable assets” that generate cash flow, said Trinh Nguyen, a senior economist at Natixis SA in Hong Kong. “If they want, they can sell these properties and find buyers.”

Debt repayments and prepayments by group entities and the Adani family itself have helped assure investors that the group does not face any liquidity or solvency issues even as its market value halved Is.

The tycoon and his family paid off borrowings worth $1.11 billion on February 6 to retrieve pledged shares in three Adani Group firms.

The Ports Unit announced plans on 8 February to repay 50 billion rupees in debt in the year starting April. The group also plans to pay off a $500 million bridge loan next month after some banks blocked refinancing of the debt, Bloomberg News reported.

“The current market volatility is temporary,” the tycoon said in the earnings statement. Adani Enterprises Ltd., the group’s flagship firm, which he said “will continue to operate with the twin objectives of moderate leverage and seek strategic opportunities for expansion and growth.”

The group is now choosing slow and steady growth over the breakneck, mostly debt-fuelled, expansion spree of recent years. The Adani group has diversified rapidly from its ports and coal based businesses into airports, green energy, data centres, cement, digital services and media.

global audit

It remains to be seen whether the new strategy will persuade investors to move beyond the Hindenburg Report, or if the short seller allegations will continue to haunt the tycoon. The group has been conspicuously reluctant to address calls for an independent investigation into claims of corporate wrongdoing and lack of regulatory compliance.

In a recent earnings filing, Adani-owned Ambuja Cements Ltd. and Adani Green Energy said the group is considering hiring independent firms to look into regulatory compliance issues around related party transactions and internal controls, but no concrete announcements have been made yet.

Chakraborty said “confirming a top-shelf global auditor” would be a positive step, although it “doesn’t sound like a complete top-to-bottom opening of the books.”

The tycoon also plans to appoint a financial controller to oversee his various trusts and privately held companies, the Financial Times reported, citing unnamed sources.

For now, Adani is getting some respite from market losses after MSCI Inc said it will postpone the implementation of the free float update for the May index review. Rebecca Sinn, a senior analyst at Bloomberg Intelligence, wrote in a report on Thursday that any index cut by MSCI of Adani Group’s shares could affect the fund holding $15 billion.

In the longer term, it will need to reckon with a reality in which its core growth strategy — rapid expansion through cheap debt — is no longer within reach.

The increase in borrowing costs, especially for the company’s units, follows the end of a global era of cheap funding, which the group took full advantage of.

“I don’t find it easy, but they are very confident that they can meet the debt obligations,” said Kranti Bathini, chief market strategist at Mumbai-based Wealthmills Securities Pvt Ltd. “We need to see how they refinance their debt.”

– With assistance from Ishika Mukherjee, Finbar Flynn, Giulia Morpurgo, PR Sanjay, Tasos Vosos, Archana Narayanan and Ashutosh Joshi.