Adani Group frees pledged shares worth 2,878 crore in Q3

n the final quarter of fiscal year 2022-23, Adani Group reduced its pledge positions in four group companies. (Photo: Reuters)
n the final quarter of fiscal year 2022-23, Adani Group reduced its pledge positions in four group companies. (Photo: Reuters)

Summary

  • The release of pledged shares can be used to repay debt, lowering its debt to equity ratio

MUMBAI : Infrastructure conglomerate Adani Group has released pledged shares worth 2,878 crore ($346.2 million) related to four of its companies during the December quarter, BSE data analyzed by Mint showed.

The group released a total 28.67 million pledged promoter shares across Adani Enterprises Ltd, Adani Green Energy Ltd, Adani Ports and Special Economic Zone Ltd, and Adani Energy Solutions Ltd.

Notably, the group has reduced its pledge positions related to ACC Ltd and Ambuja Cements Ltd to zero, from 11.72% and 100%, respectively. This follows a $3.7-billion refinance deal with a consortium of foreign banks in October, which allowed Adani Group to repay its acquisition loan for ACC and Ambuja Cements, potentially lowering its borrowing costs.

“Adani Group’s release of 2,878 crore worth of pledged shares in four companies, mainly through internal accruals, is a positive signal for investors, potentially boosting confidence," said Kranthi Bathini, director of equity strategy at Wealth Mills Securities Pvt. Ltd.

“Pledged shares can raise concerns when increasing. But Adani Group’s focus on managing debt and deleveraging books with strong free cash flows demonstrates sound financial management," Bathini said. “These factors, along with better liquidity management, are likely to improve the company’s cash flow in the short- to medium-term."

The Adani Group is emerging from a turbulent phase after the Supreme Court earlier this month dismissed petitions that had sought a separate investigation into allegations by US short-seller Hindenburg Research alleging wrongdoings by the conglomerate. The court directed the Securities and Exchange Board of India to complete its investigation in the matter in three months. But the verdict effectively lifted a cloud that had made the group untouchable for private banks and sovereign funds.

In terms of individual companies, Adani Group promoter pledge positions decreased from 0.24% to 0.23% in Adani Enterprises, from 3.35% to 1.67% in Adani Green, from 2.44% to 1.72% in Adani Ports, and from 3.34% to 2.9% in Adani Energy in the December quarter.

The significant share release involved 14.91 million shares of Adani Green at a volume weighted average price of 1,115.4 per share; 10.05 million shares of Adani Ports at 875.42 apiece; 3.6 million shares of Adani Energy at 865.45 per share; and 80,000 shares of Adani Enterprises at 2,488.18 per share.

“The release of pledged shares, especially those that are used as loan collateral, can be used to free up money that can be used to repay existing debt. This could decrease the company’s overall debt-to-equity ratio," said Atul Parakh, chief executive officer of Bigul, an online investment and trading firm. “There could also be a reduction in its borrowing costs, as lower debt levels and the resulting better credit ratings may translate to lower interest rates on future loans. Hence, this could decrease the cost of capital for Adani Group, allowing them to invest in growth opportunities with higher returns," he added. 

In the final quarter of fiscal year 2022-23, Adani Group reduced its pledge positions in four group companies, including Adani Enterprises (2.66% to 0.64%), Adani Green (4.36% to 3.5%), Adani Energy Solutions (6.62% to 3.75%), and Adani Ports (17.31% to 4.66%).

In February last year, when the Adani Group faced a market storm due to a report by US short-seller Hindenburg Research alleging accounting fraud and stock manipulation, the company paid off $1.11 billion in loans early, freeing up millions of shares in three key companies: Adani Ports, Adani Transmission (now Adani Energy Solutions), and Adani Green Energy.

This early repayment released 168.27 million shares in Adani Ports (12% of their holdings), 11.77 million shares in Adani Transmission (1.4% of their holdings), and 27.56 million shares in Adani Green Energy (3% of their holdings).

It was a signal to investors that the company was serious about managing its finances and weathering the storm.

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