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Gautam Adani’s $5 billion bet to counter critics: Report

Asia’s richest man makes $5 billion bet to silence critics, critics

Gautam Adani’s plan to raise at least $5 billion in equity aims to fend off two of the most persistent criticisms leveled against the Indian tycoon’s growing empire: high debt ratios and a limited investor base.

After four years of stunning gains — some Adani Group shares soared more than 2,000% — Asia’s richest man is launching a fundraising campaign that will likely include a local share sale As well as purchases from large investment funds in the Middle East and Canada.

An equity injection of this size is expected to help leverage the group and Bloomberg Intelligence sees a successful equity raise in a group of companies backing dollar bonds.

The billionaire is seeking legitimacy in the face of questions about his group’s breakneck expansion from a traditional port operator to a sprawling empire with assets including media, cement and green energy, which critics say has fueled leverage and financial complexity.

With this fundraising, Adani can improve debt ratios in one fell swoop, broaden its investor base, improve the liquidity of the stock and trigger extensive analyst coverage for a conglomerate that looks amazing is in form cover under despite excessive stock profit,

Sanjiv Bhasin, director at Mumbai-based brokerage IIFL Securities Ltd, said, “The fundraising exercise by the Adani group has given space to the nay-sayers.” of investors.

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Yet the question remains what kind of investors Adani will be able to attract, and whether they can be persuaded to buy into his units trading at astronomical valuations. Adani Group declined to comment.

‘Too many questions’

Bloomberg reported on Wednesday that Adani executives are attracting global sovereign and pension funds, including Mubadala Investment Company, Abu Dhabi Investment Authority and the Canada Pension Plan Investment Board.

The total fundraising size could be as high as $10 billion, according to people familiar with Adani’s thinking.

The equity schemes come as the 60-year-old seeks to reinvent himself on the global stage.

Despite adding billions of dollars to his wealth this year more than any other tycoon, Adani has struggled to shed the impression that his meteoric rise has been fueled by the support of Indian Prime Minister Narendra Modi.

Research firm CreditSights put the spotlight on the group’s “elevated” leverage in September and lawmakers demanded an investigation into some of the group’s investors.

“There are a lot of questions about opacity, about lack of disclosure, clearly valuation. But it is intriguing because if India grows then the business will grow,” said Vikas Parshad, a fund manager at M&G Investments (Singapore) Pte. “They’re on Right Place right on time.”

The board of flagship company, Adani Enterprises Ltd, is meeting on Friday to discuss options for raising funds. Adani Enterprises is trading at a valuation of over 160 times its one-year forward earnings.

By comparison, Reliance Industries Ltd. — India’s largest firm by market value — trades about 21 times, according to data compiled by Bloomberg.

“Most Adani stocks are overvalued, so investors need to be careful about taking new positions,” said Mohit Nigam, a fund manager at Hem Securities Ltd in Jaipur. “Also how they are going to handle the debt will be important going forward.”

hunger test

Adani Enterprises was added to India’s benchmark Nifty 50 index in September and its equity sale is expected to bring in several passive funds.

But simply adding more strategic or passive investors is unlikely to increase liquidity, according to Alice Wang, a portfolio manager at Quaero Capital in London, who estimates the company’s free float at about 10%, up from a reported 27%. It is very little.

“It would be a pity if it is the same strategic holders participating,” Wang said. “But as it can solve their problems without putting pressure on their share price, it’s a real do-it-yourselfer – great for the banks, for equity holders the jury is still out.”

A successful outcome for the tycoon would be to achieve something similar to fellow Indian billionaire Mukesh Ambani, who raised more $27 billion By selling stake in Reliance Industries units in 2020 to global investors such as Meta Platforms Inc and Google’s parent, Alphabet Inc.

Anish Teli, Managing Partner QED Capital Advisors LLP In Mumbai, said Adani’s expected share sale would be the first of many as the conglomerate drives into new industries.

The current plans will not only “test the appetite for the stock”, said Teli, but it will also “pave the way for raising more funds from institutional investors”. “The group is in various businesses that are cash hungry and have a long term horizon and may require further fundraising soon.”

– With assistance from Ashutosh Joshi, Baiju Kalesh, Dinesh Nair, Manuel Begorri and Maneka Doshi.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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