Sell-off in Adani stocks halts after eight days
Group unveils more steps to restore investor confidence and reduce its debt, including a plan to repay Adani Ports’ loans worth ₹5,000 crore
The sell-off in Adani group stocks halted on Tuesday as the group unveiled more steps to restore investor confidence and reduce its debt, including a plan to repay Adani Ports and Special Economic Zone Ltd’s loans worth ₹5,000 crore by March next year.
On Tuesday, the combined market value of group firms rose by ₹11,506 crore, after eight straight days of decline that saw the group lose more than $100 billion in market value.
Allegations of stock manipulation and accounting fraud by US short-seller Hindenburg Research sparked the sell-off beginning 25 January.
Tuesday’s gains were driven by short-covering in Adani Enterprises and Adani Ports and bullish activity in Ambuja Cements and ACC.
Meanwhile, earnings of Ambuja Cements beat analysts’ expectations, while Adani Ports missed estimates because of a forex loss. Adani Ports also announced the repayment of loans to reduce debt and regain investor trust.
“For FY24, we are targeting an Ebitda of ₹14,500-15,000 crore and expect to reduce net debt to Ebitda ratio to 2.5X after factoring in capex of ₹4,000-4,500 crore and loan repayment of ₹5,000 crore, which also includes some prepayment,” said Karan Adani, chief executive and director of Adani Ports, after the release of the company’s earnings.
He added that the ports’ business fundamentals remain strong and that the company was well-positioned to continue on its “growth trajectory” while being able to “deleverage” its balance sheet.
His comments came a day after the group said it prepaid loans worth $1.1 billion against shares of Adani Ports, Adani Green Energy and Adani Transmission to revoke promoter pledges.
The group saw the market value of its 10 listed entities almost halve to ₹9.93 trillion on Tuesday from ₹19.20 trillion on 24 January, when short-seller Hindenburg Research released the research report.
While six out of 10 listed stocks gained on Tuesday, led by Adani Enterprises, which surged almost 15% at closing, their overall market cap has plunged by 48% in the past nine days. The sell-off prompted the group to pull Adani Enterprises’ ₹20,000 crore share sale last week and caused a slump in Adani stock and overseas bond prices.
However, some calm was restored after the promoter prepaid $1.11 billion of loans against shares of Adani Ports, Adani Green and Adani Transmission on Monday and reassuring comments by the finance minister, regulators and lenders on market integrity and financial stability.
“There is some short-covering in frontline stocks such as Adani Enterprises, Adani Ports and cement companies ACC and Ambuja, which have witnessed share prices retracing 40-50% from their lows of last week,” said Rajesh Palviya, head of derivatives and technical at Axis Securities. “Unless some negative news flow emerges, the stocks will take cues from robust numbers and broader markets amid the RBI policy outcome on Wednesday.”
The stocks are bouncing from “oversold” levels, and the bounce, at least in the frontline names, could continue without any negative news, a senior fund manager said, requesting anonymity.
Nifty constituent Adani Ports said net profit fell 16% from a year earlier to ₹1,315 crore for the December quarter, missing Bloomberg consensus estimates of ₹1,502 crore. The decline was led by a forex loss of ₹315 crore against a loss of just ₹12.75 crore in the year-ago quarter.
Operating profit grew 13% to ₹2,737 crore from a year earlier, while logistics business earnings before interest, taxes, depreciation and amortization (Ebitda) grew 18% to ₹142 crore.
The consolidated Ebitda of the company, adjusting for the forex loss, was ₹3,011 crore, above the consensus estimate for Ebitda of ₹2,928 crore.
Ambuja Cements posted a standalone profit of ₹369 crore for the December quarter, more than twice that of the previous quarter’s ₹139 crore quarter, beating consensus analysts’ estimates of ₹301 crore. Per-tonne profitability improved to ₹829 from ₹340 in the previous quarter, according to the company.
Ambuja and ACC remain cash-positive, with net cash of ₹9,454 crore at the end of the December quarter.
The company also received cash of ₹5,000 crore against the issue of warrants to the promoters. The promoter group entity has committed ₹20,000 crore by subscribing to warrants.
Adani Green’s net income more than doubled to ₹103 crore on revenue of ₹2,260 crore, which rose 54%.
In another move to allay investor fears, Adani Green said that its international bond covenants, at the special purpose vehicle and holding company levels, have remained well within the stipulated covenants over time.
For instance, the funds from operations to net debt in one of the bonds stood at 8.13% at the end of the fiscal second quarter against a stipulated 6%.
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First Published:8 Feb 2023, 05:59 AM IST
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