Gautam Adani’s electricity unit is halting an $847mn acquisition of a coal-fired power station in India in a sign that the billionaire’s business empire is slowing down spending following a short seller attack.
The Indian tycoon’s conglomerate, which includes India’s biggest private thermal power producer, has been roiled by a stock market rout triggered by New York-based short seller Hindenburg Research, which last month released a report accusing the group of stock manipulation and fraud.
Adani has strongly denied the allegations and insisted that the group’s debt pile is manageable. But it has so far failed to stop the yields on its bonds spiking and the company’s listed shares plummeting — with those of flagship Adani Enterprises tumbling to lows of Rs1,017 from highs of more than Rs4,000 in December.
“Now Adani Power are just putting a stop or temporary halt for any further capital expansion,” said energy economist Vibhuti Garg, south Asia director of the Institute for Energy Economics and Financial Analysis. “Any new investment would come under a lot of scrutiny.”
“I think they are avoiding building up coal assets as well,” Garg added.
The Adani Group did not immediately respond to a request for comment.
Widely regarded as an ally of India’s prime minister Narendra Modi, Adani presented himself as the architect of logistics networks and power generation that formed the backbone of India’s growing economy.
But a retrenchment would mark a change in strategy for the 60-year-old, who built up his conglomerate during a breakneck debt-fuelled expansion, adding revenues by buying or building new projects ranging from solar power to airports.
Adani Power in August agreed to buy DB Power, a company that owns and runs a profitable coal-fired power plant in the Indian state of Chhattisgarh, and its parent company Diliigent Power Private. Diliigent’s owners also run newspaper business, the Bhaskar Group.
The Rs70bn ($847mn) cash deal, which was approved by India’s competition regulator in September, had an end-of-October deadline for completion, which the companies then extended four times.
But on Wednesday, the latest completion deadline, Adani Power said the parties were no longer extending the deal’s time limit.
“The long stop date under the memorandum of understanding dated August 18 2022, has expired,” the company said in a stock market filing.
In quarterly earnings announcements last week, several Adani portfolio companies said they would be scaling back capital expenditure for the financial year starting in April.
“We will not make new commitments ’til we settle this volatility period,” said Adani Group chief financial officer Jugeshinder Singh on an analyst call after Adani Enterprises’ quarterly earnings on Tuesday.
Singh insisted that current projects would be completed on schedule, and offered to bus in analysts and investors to check its progress on a new airport near Mumbai, India’s financial capital.