Adani Group touts 'very healthy' balance sheet in bid to calm investors

Billionaire Gautam Adani's embattled conglomerate said its balance sheet is "very healthy" and is laser-focused on continuing business momentum, as it looked to reassure investors to keep faith in the conglomerate despite a share rout triggered by a damning report penned by a US short-seller.

Group CFO Jugeshinder (Robbie) Singh, in an earnings call, said the group is confident of its internal controls, compliance and corporate governance.

Separately, it released a compendium of group companies to highlight that it has adequate cash reserves and has the ability to refinance debt.

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"Our balance sheet is very healthy. We have industry-leading development capabilities, strong corporate governance, secure assets and strong cash flows," Singh said. "Once the current market stabilises, we will review our capital market strategy, but rest assured we are confident in our continued ability to deliver business that provides superior returns to shareholders."

The group has been under pressure since the Hindenburg Research on January 24 accused it of accounting fraud and stock manipulation, allegations that the conglomerate has denied as "malicious", "baseless" and a "calculated attack on India".

Listed companies of the group have lost over $125 billion in market value in the three weeks since. Stocks of most Adani Group firms were up on Wednesday.

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"We are laser-focused on continuing our business momentum, in this market volatility," Singh said. "We are confident in our internal controls, compliance and corporate governance."

Adani Group's gross debt stood at Rs 2.26 lakh crore as on September 2022 and had cash of Rs 31,646 crore. "Our businesses operate on long-term annuity contracts generating assured and consistent cash flows with no market risk," it said in the credit report.

Despite the ports-to-energy conglomerate denying allegations, the report triggered a massive sell-off in the Group firms' shares.

"The current market volatility is temporary," Adani said in the earnings statement of the group's flagship Adani Enterprises Ltd (AEL) on Tuesday. "As a classical incubator with a vision of long-term value creation, Adani Enterprises will continue to work with the twin objectives of moderate leverage and looking at strategic opportunities to expand and grow."

Adani said the Group's fundamental strength lies in mega-scale infrastructure project execution capabilities, organisational development and exceptional O&M management skills comparable to the best in the world.

The Group CFO expanded on his chairman's comments in the earnings call.

AEL, he said, has a proven 25-year track record of deploying capital in a disciplined way to create value for shareholders. "During this time, we have incubated leaders in sectors that are vital to the continued growth and economic prosperity of India -- companies like Adani Ports, Adani Transmission, Adani Green Energy, Adani Total Gas and Adani Wilmar."

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It is now incubating new energy, data centres, airports and road transport businesses, which together account for over 33 per cent of AEL's EBITDA.

On withdrawing a fully-subscribed follow-on share of AEL, Singh said this was owing to the unprecedented market and stock price fluctuation that followed the Hindenburg report. "The decision to not go ahead with the FPO will not adversely affect our existing operations and future plans."

"We have an impeccable track record of responsibly managing our balance sheet. We are undisputed leaders in executing complex infrastructure projects," he said, adding that in the initial stages of a new project, leverage tends to increase, and strong cash flows thereafter result in rapid deleveraging.

Last week, Moody's Investors Service cited concerns about Adani's ability to raise capital or refinance maturing debt in the coming years while S&P Global Ratings cut the rating outlook for four group firms, including Adani Ports and Special Economic Zone Ltd and Adani Electricity Mumbai Ltd, to negative from stable. "There is a risk that investor concerns about the group's governance and disclosures are larger than we have currently factored into our ratings," S&P had said.

In August last year, CreditSights, a Fitch Group unit, described the conglomerate that spans ports to electricity, city gas and cement as "deeply overleveraged". Adani Group had rebutted the CreditSights assessment.