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Gautam Adani’s $5 Billion Bet To Counter Critics: Report

Asia’s richest man bets $5 billion to silence critics and naysayers

Gautam Adani’s plan to raise at least $5 billion in equity capital aims to quell two of the most common criticisms of the Indian magnate’s growing empire: high debt ratios and a limited investor base.

After four years of startling gains – some shares of Adani Group are up more than 2,000% – Asia’s richest person is embarking on a fundraising campaign that will likely include a local share sale, as well as a buy-in from major investment funds in the Middle East and Canada.

A capital injection of this size is expected to help the conglomerate deleverage and Bloomberg Intelligence sees a successful intra-group capital raise to support the companies’ dollar bonds.

The billionaire is seeking legitimacy in the face of questions about his group’s rapid expansion from a traditional port operator to a sprawling empire encompassing assets such as media, cement and green energy, which critics say has increased leverage and financial complexity.

With this fundraiser, Adani can instantly improve debt ratios, broaden his investor base, improve equity liquidity and generate broader analyst coverage for a conglomerate surprisingly underfunded despite excessive equity gains.

“The fundraising by Adani Group puts the naysayers in their place,” said Sanjiv Bhasin, director of Mumbai-based brokerage IIFL Securities Ltd. “He is embarking on a new fundraising effort that will increase the credibility of the group and allay the fear of investors.”


Still, questions remain about what kind of investors Adani will be able to attract, and whether they can be persuaded to buy in at the astronomical valuations at which his shares are trading. The Adani Group declined to comment.

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‘Many questions’

Adani directors are seeking to court global sovereign wealth and pension funds, including Mubadala Investment Co., Abu Dhabi Investment Authority and the Canada Pension Plan Investment Board, Bloomberg reported Wednesday.

The total size of the fundraising could reach $10 billion, according to people familiar with Adani’s thinking.

The stock plans come as the 60-year-old looks to reinvent herself on the global stage.

Despite adding more billions to his wealth this year than any other tycoon, Adani has struggled to shake the perception that his meteoric rise was fueled by the support of Indian Prime Minister Narendra Modi.

Research firm CreditSights had drawn attention to the group’s “increased” clout in September, and lawmakers have launched an investigation into some of the group’s investors.

“There are a lot of questions about opacity, about the lack of disclosures, valuations of course. But it is more difficult because the companies will grow as India grows,” said Vikas Pershad, a fund manager at M&G Investments (Singapore) Pte. “They are in the right place at the right time.”

The board of the flagship company, Adani Enterprises Ltd., will meet on Friday to discuss fundraising opportunities. Adani Enterprises trades at a valuation of more than 160 times its one-year future earnings.

By comparison, Reliance Industries Ltd. — India’s largest company by market value — is about 21 times that, according to data compiled by Bloomberg.

“Most Adani stocks are highly valued, so investors should be careful about taking new positions,” said Mohit Nigam, a fund manager at Hem Securities Ltd. in Jaipur. “How they deal with debt will also be crucial in the future.”

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Appetite testing

Adani Enterprises was added to India’s benchmark Nifty 50 index in September and the sale of shares is likely to generate some passive funds.

But just adding more strategic or passive investors is unlikely to increase liquidity, according to Alice Wang, a portfolio manager at Quaero Capital in London, who estimates the company’s free float at about 10%, much lower than the reported 27%.

“It would be a shame if it’s the same strategic holders who are in on the action,” Wang said. “But since this could solve their problems without putting pressure on their stock price, it’s a fait accompli – great for the banks, jury still out for the shareholders.”

A successful outcome for the tycoon would be to do something similar to fellow Indian billionaire Mukesh Ambani, who raised more than $27 billion in 2020 by selling stakes in Reliance Industries units to global investors such as Meta Platforms Inc. and Google’s parent company. , Alphabet Inc.

Anish Teli, managing partner at QED Capital Advisors LLP in Mumbai, said Adani’s expected share sale will be the first of many as the conglomerate pushes into new industries.

The current plans will not only “test the appetite” but also “pave the way for further capital raisings by institutional investors,” Teli said. “The group is in several businesses that are money hungry and have long gestation periods and may need more funds soon.”

–With help from Ashutosh Joshi, Baiju Kalesh, Dinesh Nair, Manuel Baigorri and Menaka Doshi.

(Except for the headline, this story has not been edited by NDTV staff and is being published from a syndicated feed.)

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