Adani Maps, a comeback strategy after the $135 billion Hindenburg run

(Bloomberg) — Almost a month after a short seller report that put the market value of Gautam Adani’s empire at more than $135 billion, the Indian billionaire has hired top U.S. crisis communications and legal teams to scrap an $850 million coal plant purchase. he reined in spending, paid off some debt and promised to pay back more.

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The ports-to-power conglomerate led by Adani, formerly Asia’s richest man, is hoping to turn the tide and calm jittery investors and creditors with the playbook after accusing US-based Hindenburg Research of accounting fraud on Jan. 24. , stock manipulation and other corporate governance violations. Adani Group denies these allegations.

Adani and his assistants have been in injury repair mode ever since. Along with a campaign to portray themselves as responsible borrowers with early and on-time repayments, executives have also launched a series of meetings to appease overseas bondholders used by the tycoon for more than $8 billion in financing in recent years.

Bloomberg News reported on February 11 that the group, recognizing the seriousness of the blow to its image, has engaged Kekst CNC as a global communications consultant. With other corporate explosions in recent years, such as WeWork Inc.’s 2019 valuation explosion.

“Situation Room”

Kekst’s mandate is to help the group restore investor confidence by providing the right context not only around the Hindenburg claims but also about other concerns revolving around the core strength of the business, a person familiar with the matter said.

Kekst works with Adani’s C-suite and communications team and can take them through a “situation room” — the firm’s term for a simulated crisis in which executives are bombarded with tweets, calls from reporters and other stressful events, said the person, who spoke on condition of anonymity because he was not authorized to speak publicly.

According to the Financial Times, citing unnamed sources, the Adani Group has also engaged the American law firm Wachtell, Lipton, Rosen & Katz to fight against the claims of the short seller. Wachtell is one of the most expensive law firms in the United States and has experience defending clients facing attacks from shareholder activists.

An Adani Group spokesman did not immediately respond to a request for comment. Kekst declined to comment, while Wachtell did not respond to requests for comment.

The sell-off in most of the group’s shares continued on Monday, with flagship Adani Enterprises Ltd. It was the worst performer with a decrease of 9.4%. Biggest loser Adani Total Gas Ltd. lowered its daily limit for the 17th consecutive session.

‘Lingering Questions’

“Even after the stock market hemorrhaging, Adani can still afford good lawyers,” said Bhaskar Chakravorty, dean of global business at Tufts University’s Fletcher School. “As a global investor, I will still have ongoing questions.”

His comments reflect how the saga has grown outside the group to overshadow India’s ability to rival China as an investment destination, prompting speculation that billionaire investor George Soros could even spur a “democratic renaissance” in the country. Adani is believed to be close to Prime Minister Narendra Modi, who has not directly addressed the issue but has criticized opposition parties for questioning their relationship with the billionaire, citing past corruption scandals.

Story aside, investors say they’re watching for two things: the group’s high leverage ratios and its ability to generate cash flow after losing $2.5 billion in fresh funds from a withdrawn share sale.

Adani management is taking steps to address these concerns. They told bondholders in a call on Thursday that they aim to triple the group’s net debt-to-Ebitda ratio next year from the current 3.2 times, Bloomberg reported, citing people familiar with the matter.


Adani Power Ltd. also acquired DB Power Ltd. in central India as part of the group’s overall efforts to reduce capital expenditure and save money. canceled the plan to acquire the coal plant project.

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

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

Debt repayments and prepayments by both units of conglomerates and the Adani family themselves have shown a push to reassure investors that the group faces no liquidity or solvency problems, despite the halving of its market value.

The tycoon and his family borrowed $1.11 billion on February 6 to buy back pledged shares in three Adani Group firms.

The ports division announced on February 8 that it plans to repay 50 billion rupees in debt within a year, starting in April. The conglomerate also plans to prepay a $500 million bridge loan due next month after some banks refused to refinance the debt, Bloomberg News reported.

“The current market volatility is temporary,” the tycoon said in Adani Enterprises’ earnings statement, “which will continue to operate with a dual objective of moderate leverage and looking at strategic opportunities for expansion and growth.”

The conglomerate is now opting for slower and more sustainable growth than most of the debt-fueled expansion frenzy of recent years. The Adani Group has rapidly diversified from its ports and coal-based businesses to airports, green energy, data centers, cement, digital services and media.

Global Audit

It remains to be seen whether the new strategy will convince investors to pass on the Hindenburg report, or whether the short seller’s claims will continue to push the tycoon. The conglomerate has been reluctant to heed calls for an independent investigation into allegations of corporate misconduct and regulatory non-compliance.

In its latest earnings filing, Adani-owned Ambuja Cement Ltd. and Adani Green Energy said the group was considering hiring independent firms to investigate regulatory compliance issues around related party operations and internal controls, but so far no firm announcements have been made.

Chakravorty said the approval of a senior global auditor “would be a positive step”, although it “doesn’t sound like a complete opening of the books from top to bottom”.

“Financial Times” reports citing unnamed sources that the tycoon also plans to appoint a financial controller to oversee his various trusts and private companies.

Some give respite

For now, Adani is getting some respite from deeper market losses after MSCI Inc said it would delay the introduction of free float updates to its May index review. Any index cut by MSCI of Adani Group shares could affect the $15 billion fund, Bloomberg Intelligence senior analyst Rebecca Sin said in a report on Thursday.

In the long term, it will have to come to terms with the reality that its main growth strategy – rapid expansion with cheap debt – is no longer available.

The increase in borrowing costs, especially for the company’s divisions, is due to the end of the period of global cheap financing, which the conglomerate took full advantage of.

“I don’t see it as a piece of cake, but they are pretty confident that they can clear their debt obligations,” said Kranthi Bathini, chief market strategist at Mumbai-based WealthMills Securities Pvt. “We have to see how they refinance their debt.”

–With assistance from Ishika Mookerjee, Finbarr Flynn, Giulia Morpurgo, PR Sanjai, Tasos Vossos, Archana Narayanan, and Ashutosh Joshi.

(Updates with stock moves in the ninth paragraph.)

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