Adani Enterprises has decided to abandon a plan to acquire a coal-fired power plant with an estimated $847m investment, in what is likely an indication of a slowdown in the conglomerate’s spending power in the wake of its decision to acquire a coal mine in Australia from GVK that was holding a massive $1.5bn (£945m) debt.
Gautam Adani’s electricity unit is halting an $847mn acquisition of a coal-fired power station in India, indicating that the billionaire’s business empire is slowing down spending following a short seller attack.
A group of Indian tycoons, including India’s largest private thermal power producer, has been hit by a stock market crash triggered by New York-based short seller Hindenburg Research, which published a report accusing the group of stock manipulation and fraud.
Adani has vehemently denied the allegations and has demanded that the group’s debt is manageable. But it has failed to arrest its bond yield rise and fall in listed company shares, with flagship Adani Enterprises falling from a high of over Rs 4,000 in December to a low of Rs 1,017.
“Now Adani Power is simply halting or temporarily halting any further capital expansion,” said energy economist Vibhuti Garg, director of South Asia at the Institute for Energy Economics and Financial Analysis. “Any new investment will come under great scrutiny.”
The Adani Group didn’t respond to a request for comment when asked if they are also avoiding building up coal assets. Garg added that this might be the case.
Widely regarded as an ally of India’s Prime Minister Narendra Modi, Adani portrays himself as the architect of the logistics network and power generation that formed the backbone of India’s growing economy. He and his allies were, in the words of a former Indian minister, the “engine and fuel” of the Modi government’s economic success.
A reduction would be a change of strategy for the 60-year-old man, who built up his conglomerate very quickly during a debt-fuelled expansion. He added revenues by buying or building new projects like solar power or airports.
Adani Power in August settled to buy DB Power. This company owns and runs a good coal-fired power plant in the Indian state of Chhattisgarh, and its parent company Diligent Power Private. Diliigent’s owners also run a newspaper business, the Bhaskar Group.
The Rs70bn ($847mn) cash deal, approved by India’s competition regulator in September, had an end-of-October deadline for completion, which the companies then extended four times.
On Wednesday, the latest deadline for the deal to be finalized, Adani Power said it was no longer extending the time limit, as the company needed to focus on other projects. In other words, the deal was effectively dead.
The company’s stock market filing stated that the long stop date under the memorandum of understanding from August 18th, 2022, has expired.
The companies mentioned in the announcement were Adani Ports and Special Economic Zone, Adani Power, and Adani Enterprises. These companies mentioned that they would be scaling back their 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.
One of the main reasons for the failure of the development was the inability to meet deadlines. The developers were faced with multiple deadlines along the way, with the latest being the final deadline for the airport’s construction.
The project was never able to meet the deadline, and the city was forced to pull the plug. However, after the collapse of the construction of an airport near the city of Lucknow, the government has upped the ante by insisting that current projects would be completed on schedule and offering to bus in analysts and investors to check its progress.