Adani group pulls out of M&As; plans to focus on debt prepayments
Apart from canceling the purchase of Macquarie’s road assets, the Adani Group has pulled out of a series of acquisition opportunities, including power plants, retailer, energy trader and road projects since January this year, bankers say. The group’s focus is on maintaining cash and prepaid debt rather than acquiring new assets.
Until early this year, bankers were putting all assets up for sale with the Adani Group. But the group is now keen on expanding its existing business, rather than acquiring stressed assets, so it is going slowly on new acquisitions,” said an investment banker.
Since January this year, the group has dropped out of the race to acquire SKS Power, a coal-fired power plant in Chhattisgarh. In February, the group canceled a plan to acquire DB Power’s thermal power assets at an enterprise valuation of Rs.7,000 crore. In the same month, it pulled out to make a bid for PTC India, which is a power broker. Subsequently, the Group did not make an offer for Future Retail after submitting its expression of interest to purchase the asset via a joint venture. On Thursday, Adani Enterprises announced that it will not proceed with the acquisition of the two Macquarie Roads Group companies at an enterprise valuation of Rs 3,100 crore.
Bankers said the group’s absence from the takeover race gave an opening to foreign private equity players, who are keen to buy into Indian infrastructure projects. Senior officials at US private equity firms Blackstone and KKR said they are keen to invest in Indian infrastructure projects that bring good returns.
In the coming months, the group will focus on raising approximately Rs 29,000 crore by selling shares in Adani Enterprises, Adani Transmission and Adani Green Energy and using the proceeds to prepay debts and finance expansion of its existing capacity. The group may also consider listing its financial services arm Adani Capital.
The group’s shares recovered 59 percent from their lows at the end of February to 10.35 trillion rupees after Hindenburg Research’s January 24 short report sent the group’s shares plummeting. The Supreme Court panel’s report, which found no organizational flaws in Adani’s investigation, helped the stock recover.
In the last fiscal year, among the group companies, Adani Ports and SEZ completed six acquisitions, including Haifa Port Company in Israel, Gangavaram Port, Karikal Port, IOTL, Ocean Sparkle and ICD Tumb with an investment of about Rs.18,000 crore in FISCAL YEAR 23. The current financial year will be used to consolidate operations.
Despite a record annual investment of around Rs. 27,000 crore – the highest ever – AP SEZ maintained net debt to Ebitda (earnings before interest, tax, depreciation and amortization) at 3.1 times in FY23. In April this year, it bought APSEZ Also a $130 million bond, which is due to be repaid in June next year. The company will use the cash inflows for more of these buybacks in the coming quarters.
Family-owned Ambuja Cements plans to expand capacity through the organic route and is on track with the company giving orders for a 14 capacity expansion. Last year, the group acquired Ambuja Cement for $6.5 billion – making it one of its largest acquisitions to date.