Adani Says Mundra Petrochemical Work Suspended As Finances Not Tied-Up Yet

Embattled Adani Group on Monday said it has put on hold major equipment procurement and site construction activities for the Rs 34,900 crore petrochemical project at Mundra in Gujarat as the project has not yet tied up finances.

The group's flagship Adani Enterprises Ltd (AEL) incorporated a wholly-owned subsidiary, Mundra Petrochem Ltd in 2021 for setting up a greenfield coal-to-PVC plant at Adani Ports and Special Economic Zone (APSEZ) land in the Kutch district of Gujarat. Asked by stock exchanges to comment on a PTI report on Sunday that the group has suspended work on the project, AEL said, "The financial closure of the Green PVC project of Mundra Petrochemicals Limited ( MPL) is pending with the financial institutions and it is in their active consideration."

Due to recent market developments, the management has decided to continue with the engineering design and other activities including financial closure in an accelerated mode, it said. "Pending the above, it has been decided to keep the major equipment procurement and site construction activities on hold," AEL said. "We are hopeful to obtain financial closure for the project in the next six months post which full-fledged procurement and construction activities at the site will commence. We are committed to completing the project in an expeditious manner so as to meet the original timelines."

After Hindenburg Research's January 24 report alleged accounting fraud, stock manipulations and other corporate governance lapses, chopping off about $140 billion from the market value of Gautam Adani's empire, the apples-to-airport group has drawn a comeback strategy to claw back and calm jittery investors and lenders by repaying some loans to address concerns around debt and consolidating operations.

The group has denied all allegations levelled by Hindenburg. As part of the comeback strategy, projects are being re-evaluated based on cash flow and finance available. And of the projects the group has decided not to pursue for the time being is the 1 million tonnes per annum Green PVC project, two sources with knowledge of the matter said. The group has shot off emails to vendors and suppliers to "suspend all activities" on immediate basis.

In the emails, seen by PTI, the group said it was "re-evaluating various project/s being implemented at group level in different business verticals. Based on future cash flow and finance, some of the project/s are being re-evaluated for its continuation and revision in timeline." The 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.

PVC is the world's third-most widely produced synthetic polymer of plastic. It finds wide applications - from flooring, to making sewage pipes and other pipe applications, in insulation on electrical wires, packaging and manufacture of aprons etc. 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. With near-stagnant domestic production of PVC at 1.4 million tonnes, India is dependent on imports to keep pace with the demand.

The Hindenburg report had alleged "brazen stock manipulation and accounting fraud" and use of offshore shell companies to inflate stock prices. The group has denied all Hindenburg allegations, calling them "malicious", "baseless" and a "calculated attack on India".

As part of the comeback strategy, the group has cancelled a Rs 7,000 crore coal plant purchase as well as shelved plans to bid for stake in power trader PTC to conserve expenses. It has repaid some debt and pre-paid some of the finances raised by pledging promoter stake in group companies.