BackAdani prepays $1.11 billion loans
Prepayment will help release pledged shares in Adani Transmission, Adani Ports and Adani Green Energy
PremiumBillionaire Gautam Adani has prepaid $1.11 billion in loans ahead of maturity to release pledged shares in Adani Transmission Ltd, Adani Ports and Special Economic Zone Ltd and Adani Green Energy Ltd, in a move aimed at restoring investor confidence and easing the selling pressure in group stocks.
The promoter’s early payment will result in the release of 168.27 million shares of Adani Ports, 11.77 million shares of Adani Transmission, and 27.56 million shares of Adani Green, according to a statement by the group on Monday.
“In light of recent market volatility and in continuation of the promoters’ commitment to reducing the overall promoter leverage backed by Adani listed company shares, we are pleased to inform that promoters have posted the amounts to prepay $1,114 million ahead of its maturity of September 2024," the statement said.
“This (revocation of the pledges) could be one more step toward calming the storm that has engulfed the group," said a senior wealth manager. “Reassuring voices on financial stability and market integrity by the FM, RBI, SBI and Sebi over the weekend offer hope to investors that the broader market remains resilient amid the crisis."
Adani Ports has fallen 28%, Adani Transmission and Adani Green Energy by 54% each since US short seller Hindenburg Research’s report alleging stock manipulation and accounting fraud against the infrastructure and utility conglomerate was released on 24 January.
Following the news of the revocation of the promoter pledges, Adani Ports gained 9% to close at a provisional ₹545.45, while Adani Transmission and Adani Green remained locked at the 10% and 5% lower circuits.
The billionaire’s move aims to reinstate trust among investors about the group’s ability to weather the crisis triggered by Hindenburg’s allegations that wiped out nearly ₹10 trillion in the group’s market capitalization and triggered the cancellation of a ₹20,000 crore share sale.
Mint first reported on Monday that the Adani group plans to completely reduce its share pledges, citing an executive close to the development.
“We will pay down all our share-backed loans, 100% of them; that will happen very shortly. Second, we will build up more cash buffers in these businesses, they are already very strong, and this will be demonstrated ...when the results are out," he said.
The promoter group’s share pledge in Adani Ports, Adani Transmission, Adani Enterprises and Adani Green stood at 17%, 7%, 4%, and 3%, respectively, as of 31 December. With the fall in share prices last week, these pledges rose by 20%, with Adani Ports’ share pledge, for example, climbing to 20.6% of the promoter’s holdings.
A senior executive at a brokerage said typically, if the pledged security falls, the borrower has to top up the margin or pay the difference to the lender to maintain status quo. If the margin call is not fulfilled, the lender may sell the pledged shares, worsening the fall.
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