Six months after a Hindenburg report led to a meltdown in Adani Group stocks, the conglomerate is trying to strike a balance between growth, capex and deleveraging its debt

Gautam Adani, 61, loves business jargon. Just a few months ago, the billionaire, caught in the cross hairs of the US-based short-seller Hindenburg Research, stumbled upon a new term, βpermacrisisβ. The term, which refers to a prolonged period of uncertainty, was chosen as Collins Dictionaryβs word of the year in 2022. It describes the turbulent and uncertain nature of that year, and perhaps also the situation the Adani Groupβs Chairman and Founder finds himself inβas he navigates the mother of all existential crises of his three-decade entrepreneurial journey.
Though the challenges still lingerβsparked by a Hindenburg report alleging accounting fraud, stock manipulation, and routing of funds through foreign shell companies, all of which the firm has refutedβthere is some breathing space. The group, which has a top line of Rs 2.62 lakh crore and had lost over $100 billion in market capitalisation at one point, is gradually charting a new course by rebalancing its growth ambitions, slowing down on big-ticket acquisitions, deleveraging, and strengthening its balance sheet. The Adani family recently divested stakes in four group companies to raise $1.87 billion (Rs 15,500 crore) from global private equity firm GQG Partners. In addition, three companies have board approval to raise funding of $4 billion over the next 12 months. βThere will be more equity dilution if they plan to grow at the same pace as earlier. Itβs a Catch-22 situation. If growth slows down, the valuations will correct further,β sums up Ambareesh Baliga, a seasoned observer of the markets. But the group has been diluting equity since 2019 when global players like TotalEnergies, Qatar Investment Authority and Abu Dhabi-based IHC group invested a total of $5.79 billion.

There will be more equity dilution if they [the Adani Group] plan to grow at the same pace
as earlier. Itβs a Catch-22 situation [for them]. If growth slows down, the valuations will correct further
Ambareesh Baliga
Stock Advisor
βOver the next 20 years, Adani portfolio companies and promoters want to raise $50 billion of equityβ¦ We want to invest close to $500 billion in core infra as a base case. We will run this programme of equity for the next two decades,β says Group CFO Jugeshinder βRobbieβ Singh.
But the new equity is coming with higher dilution. Besides, there are hard choices being made. For instance, the group recently exited the financial services business; it is now focussing on its core infra model, plus adjacencies. βWe invest for an intergenerational period, upwards of 30 years. We have not even completed the foundation of our growth. For instance, we are setting up a ports business to be able to handle and move cargo equivalent to what India moves today as a country. We have to remain strategically patient,β explains Singh.Β

The firmβs equity will be recycled, as cash flow from each year serves as equity contribution for the next project. So, ROE is expected to keep expanding
Vinit Bolinjkar
Head of Research
Ventura Securities Ltd
Market watchers are taking note. Stakeholders Empowerment Services (SES), a proxy advisory firm, terms the Adani Groupβs debt concerns as overstated. Rohit Chawda, acting CEO at Taurus Mutual Fund, agrees. βThe current challenging period will only drive the company to make more prudent investment choices, and corporate governance standards will improve even more,β he says.
βOur balance sheet, assets, and operating cash flows continue to get stronger and are now healthier than ever before,β Gautam Adani had said while sharing the groupβs operational performance with shareholders in July. His bet is on infrastructure assets, which generate stable revenues and contribute over four-fifths of the groupβs Ebitda. A proxy for cash flow generation capacity, Ebitda shows the groupβs core operating performance. (See box Financial Health Check.) Florida-based GQG, the groupβs top backerβwhich is located just 1,000 miles away from Hindenburgβs New York headquartersβis estimated to have invested more than $4 billion in Adani Group companies, including from the secondary market. Rajiv Jain, Chairman and Chief Investment Officer of GQG Partners, advises the Adanis to not deleverage too much. βThis is the time to go full throttle,β he says. How is Gautam Adani keeping all the balls in the air? Let us find out.

The current challenging period will only drive the company to make more prudent investment
choices, and corporate governance standards will improve even more
Rohit Chawda
Acting Chief Executive Officer
Taurus Mutual Fund
Funding in Focus
Adani Enterprises Ltd (AEL), the groupβs holding company that withdrew its Rs 20,000-crore follow-on public offering earlier this year, is back in the market with a Rs 12,500-crore equity raising plan. βOf the several projects underway, two of the key ones include the Navi Mumbai Airport and the copper smelter [in Gujaratβs Mundra]. Both are on schedule. The Navi Mumbai Airport is preparing for operational readiness and airport transition by December 2024,β Gautam Adani had announced to shareholders.
Then thereβs the data centre business AdaniConneX, the expansion of which is on track. In June, AdaniConneX secured $213 million in financing from over half-a-dozen foreign banks. This money will be used for data projects in Chennai (with 17 MW capacity) and Noida (50 MW). It has acquired land for data centres in Navi Mumbai and Visakhapatnam, while the Noida and Hyderabad ones are almost 30 per cent complete.
Adani Road Transport, meanwhile, remains on the sidelines of bidding for projects. The company claims that the 64-km Ganga Expressway Project in Uttar Pradesh has achieved financial closure. In June, the company with a roads portfolio of Rs 40,000 crore decided to walk out of Macquarieβs Rs 3,110-crore toll roads project deal.
AELβs biggest bet is green hydrogen (through AEL subsidiary Adani New Industries Ltd, or ANIL), where it is setting up an ecosystemβfrom generation of green hydrogen, downstream products (ammonia and urea), to manufacturing of supply chain products like wind turbines, batteries, and electrolysers. CARE Ratings says the company has decided to defer the large-scale capex plan in green hydrogen till market and investment appetites have revived. There has been a downward revision in capex plans to optimise capital. β[But overall] we remain on target. ANIL is nearly mid-way through completing our integrated manufacturing facility for green hydrogen,β says Singh.
Balancing the Energy Mix
Today, Adani Green Energy Ltd (AGEL) has the largest operating renewable energy portfolio with 8.1 gigawatt (GW) of capacity, with a target of 45 GW by 2030. It plans to add 3 GW of capacity this year, matching last yearβs addition. It has lined up a capex of Rs 14,000 crore, while in July the AGEL board cleared a proposal to raise Rs 12,300 crore of equity share capital. β[The] Adanis are efficient; for example, they get paid in 60 days versus 260 [days] for a competitor. Given their efficiencies, it is our view that the company will generate higher returns,β says GQGβs Jain.
In terms of revenue visibility, there is a 25-year fixed-tariff power purchase agreement (PPA) with an average portfolio tariff of Rs 2.98 per unit. Analysts, however, are wary of AGELβs valuation, which is 32 times its book even after correction. βThe companyβs equity will be continuously recycled, as the cash flow generated each year will serve as an equity contribution for the next project. As a result, the return on equity is expected to keep expanding,β explains Vinit Bolinjkar, Head of Research at Ventura Securities.
Then there are potential challenges, such as if a distribution company (discom) defaults on payments. While renewable energy is the future, the thermal power business (called Adani Power Ltd or APL) is raking in profits and has made its first transnational foray by supplying power to Bangladesh. It will supply 1,496 MW of power for 25 years. APL, with an operational capacity of 14,450 MW, is aiming for 16,850 MW by June 2027.Β
The Hard Assets
Days after the Hindenburg report, Gautam Adani had landed in Israel to complete the $1.15-billion acquisition of Haifa Port. GQGβs Jain interprets it as a clear vote of confidence, reflecting the Israeli governmentβs trust in the groupβs competence. Haifa Portβs Indian Ocean-Mediterranean route will strategically position the company. Adani Ports and Special Economic Zone (APSEZ), which handles one-fourth of the countryβs cargo volumes through 14 ports, is also expected to commission Indiaβs largest trans-shipment hub in Vizhinjam, Kerala, and a port in Colombo. It has planned a capex of Rs 4,000-4,500 crore in the current fiscal. βAPSEZ is the best proxy to take part in the growing Indian economy, especially in the goods trade,β says Chawda of Taurus.
Then thereβs ACC-Ambuja Cements that the group acquired last year from Switzerlandβs Holcim for $10.5 billion to become Indiaβs second-largest cement producer. In terms of expansion, it plans to double cement capacity to 140 million tonnes (MT). But first, it is taking advantage of group synergies to reduce costs. For instance, it can save Rs 300-400 per tonne from energy costs, freight costs, and forwarding costs.Β
Risk & Reward
Explaining the overall investment philosophy, Singh says the group currently has a portfolio of 10 companies. βWe will have close to 14-15 companies by around 2033. We have an objective to hold a certain percentage in our portfolio. Within that portfolio, when we recycle capital, it is not dilution,β he says. The promoters want to own the majority and the highest stake possible in the early-stage companies. βOur objective is to get our portfolio into a position where the current cash that we hold in the bank and free cash flow is greater than any debt maturity requirement. At a portfolio level, we will get there by 2025,β he says.
While the Supreme Court-constituted expert committee on the Adani stocks crash did not find any regulatory failure, the sword of ongoing investigations by the Securities and Exchange Board of India (Sebi) is still hanging over the groupβs head. βWe remain confident in our governance and disclosure standards,β Gautam Adani had said, putting up a brave front before shareholders. The groupβs stocks are showing a gradual recovery, and it is also expanding internationally. For instance, Adani was in Sri Lanka in July, rubbing shoulders with President Ranil Wickremesinghe. With a container terminal and a wind project already in his bag, he pitched for a green hydrogen plant.
Amidst the crisis, Gautam Adaniβs greatest asset remains his management team and board, standing firmly by his side. If he successfully navigates the current challenges, he will surely write a new chapter in his entrepreneurial journey, possibly even introducing the term βpermasuccessβ to the Collins Dictionary.