Adani Group has come under attack following the scathing report by US short-seller Hindenburg
Hindenburg, in its report published on January 24, claimed that key listed Adani companies had taken on substantial debt, putting the entire group on precarious financial footing. As the report triggered a crash in Adani stocks, the group scrambled to cut its debts and win back the confidence of investors.
- Updated Mar 19, 2023, 2:49 PM IST
Hit by Hindenburg Research’s stinging report, Adani Group has reportedly suspended work on a Rs 34,900 crore petrochemical project in Gujarat’s Mundra. In 2021, Gautam Adani-led group’s flagship firm Adani Enterprises Ltd (AEL) incorporated a wholly-owned subsidiary – Mundra Petrochem Ltd – for setting up a greenfield coal-to-PVC plant at Adani Ports and Special Economic Zone (APSEZ) land in the Kutch district of Gujarat.
Now, a report suggests that the group has decided not to pursue, for the time being, the 1 million tonnes per annum Green PVC project. The group has shot off emails to vendors and suppliers to ‘suspend all activities’ on an immediate basis, the news agency PTI reported on Sunday.
Hindenburg, in its report published on January 24, claimed that key listed Adani companies had taken on substantial debt, putting the entire group on precarious financial footing. As the report triggered a crash in Adani stocks, the group scrambled to cut its debts and win back the confidence of investors. The recent of suspending the project comes as part of that effort to downsize debts.
According to the report, the group in its emails has asked the vendors and suppliers to “suspend all activities of the scope of work and performance of all obligations” for Mundra Petrochem Ltd’s Green PVC project “till further notice.” The group has said the management is re-evaluating various projects being implemented at the group level in different business verticals. “Based on future cashflow and finance, some of the project/s are being re-evaluated for its continuation and revision in timeline,” it added.
A group spokesperson told the news agency that AEL will be evaluating the status of growth projects in the primary industry verticals over the coming months. “The balance sheet of each of our independent portfolio companies is very strong. We have industry-leading project development and execution capabilities, strong corporate governance, secure assets, and strong cashflows, and our business plan is fully funded. We remain focused on executing our previously outlined strategy to create value for our stakeholders,” the spokesperson said. “AEL will be evaluating the status of growth projects in the primary industry vertical over the coming months”.
Adani’s unit was to have a poly-vinyl-chloride (PVC) production capacity of 2,000 KTPA (kilo tonne per annum) requiring 3.1 million tonnes per annum (MTPA) of coal that was to be imported from Australia, Russia, and other countries, the news agency said.
PVC, the world’s third-most widely produced synthetic polymer of plastic, finds wide applications – from flooring to making sewage pipes and other pipe applications, in insulation on electrical wires, packaging, and manufacture of aprons etc. The Adani Group had planned the project as PVC demand in India at around 3.5 MTPA was growing at the rate of 7 per cent year-on-year.
The group came under attack following the scathing report by US short-seller Hindenburg, which accused the group of indulging in “brazen stock manipulation and accounting fraud”. While the group denied all the allegations, the damage was already done as its stocks fell nearly 80 per cent before making some recovery.
Now, the group is cancelling some projects and pre-paying some debts to restore the confidence of the investors. Recently, the troubled group cancelled a Rs 7,000 crore coal plant purchase and shelved plans to bid for a stake in power trader PTC. Last week, the group announced that it had completed the full prepayment of margin-linked share-backed financing, amounting to $2.15 billion, ahead of the committed timeline of March 31, 2023. The group said the promoters had also prepaid the $500 million facility taken to buy Ambuja.
(With inputs from PTI)