Adani Group to raise $2.5 bn through QIP, foreign loans

Biggest fund raising by Adani to fund port, power projects

In its biggest fund-raising excercise, Adani Group is set to raise $2.5 billion (Rs 15,000 crore) from investors in India and abroad. Within a quarter, the group will raise $1 billion (Rs 6,000 crore) by selling new shares of Adani Enterprises, the group’s flagship firm, and an additional $1.5 billion (Rs 9,000 crore) from banks abroad to fund various projects.

With a pro-business government taking charge at the Centre, Adani Group companies have seen an unprecedented boom in their stocks. Shares of Adani Enterprises have jumped 235 per cent since Narendra Modi was named the Bharatiya Janata Party’s prime ministerial candidate in September 2013.

Of its $1.5-billion foreign loan, the group has already raised $500 million (Rs 3,000 crore) to refinance the loans it had taken to acquire a coal and port project in Australian. The group is raising funds for its $15.5-billion coal mining project in Australia, as well as its ports and power projects in India. Adani Group also needs funds for its Rs 5,500-crore takeover of Dhamra port from Larsen & Toubro and Tata Steel.

An email to Adani group did not elicit a response.

Insiders say the fund-raising will help Adani Enterprises and other group companies to expand operations. Analysts say the Modi government’s first Budget is expected to provide a major boost to the infrastructure sector, which will help companies in this sector bag new projects. The group delivered a good performance for the quarter ended March. Adani Enterprises reported a fivefold in increase in consolidated profit at Rs 2,848 crore, primarily driven by the company’s power business, which recorded additional revenue because of compensatory tariff for two projects. During the March quarter, contribution of the power business rose 200 per cent compared to the year-ago period; sales rose 40 per cent to Rs 16,171 crore.

 

However, analysts fear the group’s biggest bet, in Australia, runs the risk of going sour. They say the project might not be viable and the cost of electricity produced by imported Australian coal will be very high for Indian consumers. Tim Beckley, director of energy finance studies at the Institute of Energy Economics, Sydney, said the Adani and GVK coal basin proposals were running three-four years late, with financing not in place. “To justify the construction of a power plant in India based on Australian coal, a power purchase agreement of Rs 5.4-5.7 per kWh will be required, as well as price indexation of four per cent a year. This is double the last reported average sales price of electricity across India of Rs 3 a kWh and triple the local coal-fired power purchase price signed during recent years,” he said.

In an interview with Business Standard on May 3, Adani Group Chairman Gautam Adani had said the group’s investments in Australia were aimed at augmenting India’s energy resources.  “India has the third-largest reserves of coal in the world, but due to extensive and elaborate procedures and slow decision-making, we have been lagging in coal mining. Investments by Indian companies, including Adani, outside India in coal mining are to ensure India’s energy security,” he had said.