Adani Group’s big infra bets pay off amid covid2 min read . Updated: 26 Oct 2020, 07:25 AM IST
Experts say all group companies, except Adani Power, are financially self-sufficient
The Adani Group has spent the better part of 2020 going full steam ahead on acquisitions and bidding for new projects, when most infrastructure companies have reduced spending on these. The group tops the leader board across the Indian infrastructure space, including ports and logistics, coal mining, airport operations, power production and city gas distribution, besides making significant inroads into defence, power transmission and distribution and data centres.
In September, the group made its most audacious bet yet, taking over control of the Mumbai international airport from the GVK group, besides getting a controlling stake in the upcoming Navi Mumbai International Airport. It has also won 50-year operating rights for the recently privatized airports at Ahmedabad, Lucknow, Mangaluru, Jaipur, Thiruvananthapuram, and Guwahati.
Adani Ports and Special Economic Zone (APSEZ), the cash cow of the group, also completed the acquisition of Krishnapatnam port for an enterprise value of ₹12,000 crore, cementing its market share along the eastern coast, while it is pursuing the bid for the bankrupt Dighi port.
The renewable energy business, Adani Green Energy Ltd, won a 8 gigawatt solar energy contract from the government in June, making it the world’s largest solar developer by capacity, according to a ranking by renewable energy consultant Mercom Capital Group.
“Adani Group has delivered a 20% compound annual growth rate in its market capitalization since April 2013 led by strong organic growth, mergers and acquisitions, and diversification to businesses such as renewables and gas," a report by brokerage firm CLSA said last December. “A weak economy has not deterred Adani Group from building businesses by acquiring concessions, especially at a time when other developers are struggling. The group aims to double port traffic by FY25, and installed renewable energy capacity by FY21," it said.
“The Adani Group has grown at a blistering pace this decade," said an industry analyst, seeking anonymity. “All group companies are financially self-sufficient now except for Adani Power. They haven’t faced a problem servicing their debt obligations. The only group company that needs regular cash infusions is Adani Power, which houses the thermal energy plants," said the analyst.
Adani Power reported a net loss of ₹682 crore at the end of Q1FY21 and ₹2,275 crore through FY20. “Once this is delisted, the promoter can ring-fence the loss-making assets, maybe renegotiate the power purchase agreements or restructure debt. I think this is the right move for Adani Power," said the analyst.
However, some of those tracking the group see concern over promoter pledges, or loans against promoter shareholding. This comes in the wake of unrestricted promoter pledging having led to the downfall of industry leaders such as Café Coffee Day, Yes Bank, the Essel Group, and Karvy Stock Broking. Promoter pledges as a percentage of shareholding in APSEZ has climbed steadily over the past five years from 10.83% in September 2015 and 29.79% in September 2018 to 30.86% in September 2020.