Adani Enterprises seeks to raise 200 billion rupees ($2.5 billion) through the sale of new shares as billionaire Gautam Adani’s flagship company looks to increase its free float and improve leverage ratios.
The breakneck expansion by the ports-to-power conglomerate has added both financial complexity and leverage to the business.
The fund-raising, in one fell swoop, can improve the company’s debt ratios — lenders are urging for it too — and broaden its investor base, increase stock liquidity and possibly spur analyst coverage for a company that is currently tracked by just two brokerages, despite surging more than 2,000 per cent in the past four years.
Shares extended declines to as much as 1.9 per cent after the announcement during trading in Mumbai.
While Adani Enterprises does not have a dollar bond, all outstanding dollar bonds of other group firms gained. Adani Ports & Special Economic Zone’s dollar notes due in 2041 gained 2.5 cents, extending this week’s gain to 6.9 cents, on track for their best-ever week.
Bloomberg News reported earlier this week that Adani Enterprises was considering a follow-on issue of at least $1.8 billion, as part of a $5 billion fund-raising exercise.
Research firm CreditSights in September said Adani Group’s leverage was “elevated”, which the conglomerate denied, saying the debt ratios of its companies were “healthy”.
Mr Adani, the world’s third-richest person, has rapidly diversified his group to include airports, data centres, digital services and media. Some of this diversification has come through a string of acquisitions, the most prominent being the $6.5 billion buyout of Holcim’s two Indian cement makers and the ongoing hostile takeover of media company New Delhi Television.
The Adani Group is also looking to raise fresh debt over the next year to refinance its high-cost borrowings and fund projects in the pipeline.
The current equity fund-raising, in this context, may help allay any investor concerns about a mounting debt burden.