Adani Weighs $5 Billion Fundraise As Banks Urge Deleveraging: Report

Billionaire Gautam Adani has approached sovereign wealth funds to raise $5 billion after lenders asked the Adani group to reduce leverage, Bloomberg reported on Wednesday, citing people familiar with the matter.

Adani has reached out to top officials at firms including Mubadala Investment Co. and Abu Dhabi Investment Authority about investments. Adani’s group is looking to other large investment funds in the Middle East as well as in Canada to invest. The group has even discussed raising as much as $10 billion, the report said, citing people aware of the matter. 

Adani Enterprises Ltd. is considering issuing about $1.8 billion to $2.4 billion in new shares as soon as next year. The $5 billion to $10 billion target would include the funds raised in the potential Adani Enterprises share issue. 

The company’s board will meet on November 25, 2022, to discuss raising funds, Adani Enterprises said in an exchange filing Tuesday.

In August this year, research firm CreditSights had red-flagged Adani Group’s “elevated” leverage. 

Adani's ports-to-power-to-cement conglomerate is "deeply overleveraged" with the group predominantly using debt to invest aggressively across existing as well as new businesses, CreditSights, a Fitch Group unit, said. 

"In the worst-case scenario, overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap, and possibly culminate into a distressed situation or default of one or more group companies," CreditSights said.

In its reply, the conglomerate cited an improved net debt to operating profit ratio and more than halving of loans from public sector banks. it said companies in the group have consistently de-levered, with the net debt to Ebitda ratio declining to 3.2 times from 7.6 times in the last nine years.

Days later, another rating agency S&P Global said the conglomerate's debt-funded future acquisitions can start putting pressure on ratings of its group companies.

The rating agency, however, added that Adani's group, which has grown on acquisitions, has fairly solid fundamentals.

However, in September, CreditSights said in a new report that it “has discovered calculation errors” in its recent debt report on two Adani Group companies, adding the latest “corrections” did not change its investment recommendations.

The Adani group has diversified from mines, ports and power plants into airports, data centres and defence. It recently forayed into the cement sector with a USD 10.5 billion acquisition of Holcim's India units and is also looking to set up an aluminium factory. Most of this expansion has been funded by debt.