Hindenburg fallout: Adani Group suspends work on ₹34,900 cr petchem project

Adani Group Chairman Gautam Adani. | Image Credit: Reuters

Adani Group has suspended work on a ₹34,900 crore petrochemical project at Mundra in Gujarat as it focuses resources to consolidate operations and address investor concerns following a damning report by a short seller based in US, sources said.

Group flagship Adani Enterprises Ltd (AEL) has in 2021 acquired a wholly owned subsidiary, Mundra Petrochem Ltd for setting up a greenfield coal-to-PVC plant at Adani Ports and Special Economic Zone (APSEZ) land in Kutch district of Gujarat.

But after a Jan. 24 Hindenburg Research report alleging accounting fraud, stock manipulations and other corporate governance had shaved about $140 billion from the market value of Gautam Adani’s empire, the group hopes apple-to-airport to recover and appease investors and lenders. through the return strategy.

The turnaround strategy is based on addressing investor concerns about debt by paying off certain loans, consolidating operations, and fighting charges.

The group denied all the allegations leveled by Hindenburg. As part of this, projects are re-evaluated based on cashflow and financial availability.

And among the projects the group has decided not to pursue for now is the 1 million tonne per year Green PVC project, two sources with knowledge of the matter said.

The group has shot mails to vendors and suppliers to “suspend all activities” on an immediate basis.

In the mails, saw PTI, the group asked them to “suspend all scope of work activities and performance of all obligations” for Mundra Petrochem Ltd’s Green PVC project “until further notice.” This is the following “unforeseen scenario”.

The management, he said, is “re-evaluating the various projects that are being implemented at the group level in different business verticals. Based on the future cash flow and finances, some of the projects are being re-evaluated for its continuation and change in the timeline.”

Reached for comments, a group spokesperson said AEL will review the status of growth projects in key industry verticals in the coming months.

“The balance sheets of each of our independent portfolio companies are very strong. We have industry-leading project development and execution capabilities, strong corporate governance, secure assets, strong cash flows, and the our business plan is fully funded. We remain focused on executing our previously outlined strategy to create value for our stakeholders,” the spokesperson said.

“AEL will review the status of growth projects in key industry verticals in the coming months.”

The unit will have a poly-vinyl-chloride (PVC) production capacity of 2,000 KTPA (kilo tonnes per annum) requiring 3.1 million tonnes per annum (MTPA) of coal to be imported from Australia, Russia and others other countries.

PVC is the world’s third most widely produced synthetic plastic polymer. It finds wide application — from flooring, to making sewage pipes and other pipe applications, to insulation in electric cables, packaging and making aprons etc.

Adani Group planned the project as PVC demand in India at around 3.5 MTPA is growing at a rate of 7% year-on-year. With near-stagnant domestic production of PVC at 1.4 million tonnes, India relies on imports to keep up with demand.

The Hindenburg report alleged “brazen stock manipulation and accounting fraud” and use of offshore shell companies to inflate stock prices. The group denied all Hindenburg allegations, calling them “malicious”, “baseless”, and a “calculated attack on India”.

As part of the turnaround strategy, the group has canceled a ₹7,000 crore coal plant purchase as well as plans to bid for a stake in power trader PTC to save costs. It has repaid some debt and repaid some of the proceeds by pledging promoter stake in group companies.

Author: Amit Kumar
Amit Kumar is a highly experienced financial expert with over 10 years of experience in banking and finance. He shares his insights on loans, finance, and business strategies through engaging articles on this Loan & Business site, offering practical advice for anyone seeking to improve their financial situation. Amit's mission is to empower his clients and readers to make informed financial decisions and achieve their financial goals.

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