Adani pins hopes on dollar revenues from ports

Gautam Adani said that at group level, forex exposure had had a blended impact on consolidated position

With the rupee hovering around new lows against the dollar, the Adani Group is taking a slew of steps to ring-fence the group from the negative impact of currency depreciation. The Ahmedabad-based group is pinning its hopes on dollar revenues from its port business, pass-through of additional coal import costs to consumers and a dollar bond issue to replace existing loans in these uncertain times.

According to Gautam Adani, chairman of Adani Group, the foreign exchange exposure has a blended impact on the consolidated position. “This is because our port business has two important income streams, which are US dollar-denominated, whereas in case of trading, hedging of exposures gets done continuously on a back-to-back basis at the time of winning the tender and, or during procurement process,” he said. The Indian currency depreciated by around 20 per cent since January this year to breach the 68-mark against the dollar on Wednesday.

This has led to a massive cost escalation for Indian companies with exposure to either raw material from abroad or dollar debt taken to fund projects in India. The costs for companies without any export cover is worse. The group imports coal to fuel its power stations in India and has close to $5 billion in dollar debt. The group has also invested close to $2 billion in an Australian mining project.

The company’s exports were Rs 17 crore, according to its 2013 annual report. In the case of Adani Power, Chairman Adani said the majority forex exposure was on long tenure loans, which had been fully provided for up to June 30 and, hence, any increase and decrease continued to be accounted for on quarterly basis. “Under our internal analysis at group level, over the next three-five years, once a part of loans are repaid, we would have a positive impact if there were to be continued depreciation of the rupee,” he added.

The group, along with other power producers, has asked the power regulators to pass on any additional cost to consumers. Last week, the Maharashtra power regulator (Maharashtra Electricity Regulatory Commission) approved a Rs 0.57 a kWh increase in rates for power produced from Adani’s plant in Tiroda, Maharashtra, to Rs 3.12 unit for 800 Mw for the next 12 months in lieu of the unavailability of the captive coal mine.

Besides, the Deepak Parekh-led committee has also recommended a Rs 0.55-0.6 a kWh increase for power from the Mundra plant in Gujarat. Analysts say both these measures will reduce losses for Adani Power which announced its record loss of Rs 918 crore in the June quarter. The matter of increasing tariff is now pending at the Supreme Court.

The group's flagship consolidated revenue was Rs 47,351 crore in 2012-13 with a net profit of Rs 1,612 crore with negligible exports. Adani group is also looking at raising close to $1.5 billion to $2 billion from the international markets to refinance its existing loans.

It has not yet launched the offer.

Investors are giving thumbs down to the Adani Group. Adani Power is trading at Rs 36 a share on the BSE, down 41 per cent since January this year, while Adani Port is trading at Rs 122 a share, down nine per cent in the same period. The holding company, Adani Enterprises, is down 46 per cent since January to Rs 146 apiece. The BSE Sensex in the same period was down 7.5 per cent.

What is Adani doing to combat rupee fall?

* Increasing port dollar revenues
* Raising more dollar debt
* Postponing Australia project till year-end
* Pass on higher coal import costs to customers
* Increasing exports