India’s Adani Group Wants To Demerge More Business; Brushes Off Debt Fears

India’s Adani Group, which is headed by billionaire Gautam Adani, said it intends to spin off more businesses by 2028 and brushes aside any debt concerns.

The corporate house is preparing to spin off, or demerge, its mining, metals, airports, data centre, roads, and logistics businesses, said Chief Financial Officer Jugeshinder Singh said.

“The criteria is for these businesses to achieve a basic investment profile and experienced management by 2025-28, which is when we plan to demerge them,” he told a media briefing on Saturday.

This company is betting heavily on its airport business and is striving for it to become the biggest services base in the country in the years to come, outside of government services, Singh said. The Adani group has spun off its coal, power, transmission, and green energy business in past years.

Adani, the world’s third-wealthiest man, according to Forbes, has been expanding his empire from energy to ports and now owns a media company.

The flagship firm Adani Enterprises (ADEL.NS) is expected to amass up to $2.5 billion in a follow-on share sale, Reuters previously reported, following a jump in the share price in recent years. Its stock rose by almost 130% last year, but has shed about 7% so far this year.

Other Adani group companies also rose more than 100% in 2022, prompting some investors to worry about the companies being overvalued. However, some traditional valuation metrics are not fitting for the businesses, Singh said.

“We don’t look at P/E multiples for any of our businesses. For infrastructure businesses, the rate of return on assets deployed is relevant. Adani Enterprises works on a sum-of-parts model,” he said

The company is giving a discount of 8.5%-13% to attract retail investors, according to its prospectus.

“We don’t go to market if we are not sure of raising the full amount ($2.5 billion),” Singh said, adding that the firm wants to boost the participation of retail investors and is aiming for a primary issue rather than a rights issue.

It has said it intends to use the money to fund green hydrogen projects, Greenfield expressways, and airport facilities, in addition to paring its debt.

The group has commonly incubated businesses within its flagship company, to demerge and list them later. Its listed arms currently operate in sectors including ports, green energy, food production, and power transmission.

India’s Adani Group, which is headed by billionaire Gautam Adani, said it intends to spin off more businesses by 2028 and brushes aside any debt concerns.

No Debt Worries For Adani Group

Analysts’ worries over its debt accumulation have been brushed aside by Singh.

Adani Group’s total gross debt in the financial year ending March 31, 2022, jumped 40% to 2.2 trillion rupees. CreditSights, part of the Fitch Group, labeled the Adani Group last September as “overleveraged” and said it had “concerns” over its debt.

While the report later rectified some calculation errors, CreditSights said it upheld concerns over leverage.

“Nobody has raised debt concerns to us. No single investor has. I am in touch with thousands of high net worth individuals and 160 institutions and no one has said this,” Singh said.

($1 = 80.9790 Indian rupees)