Adani Group Plans To Bring Down Promoter Pledge To Zero
Billionaire Gautam S. Adani, chairman of Adani Group, attends an event in Tokyo, Japan. (Photographer: Tomohiro Ohsumi/Bloomberg)

Adani Group Plans To Bring Down Promoter Pledge To Zero

Adani Group, which has six listed companies in India with a combined market value of more than Rs 1.4 lakh crore, plans to bring down its pledged holding—one of the key overhangs on the stocks.

The Gautam Adani-founded conglomerate intends to lower its pledged holding to zero over the next 12-18 months, Karan Adani, chief executive officer of Adani Ports and Special Economic Zone Ltd., said in a post-earnings conference call.

As of March 2020, more than a third of the group’s ownership was pledged, according to data compiled by BloombergQuint. Since then, the percentage of stake offered as collateral by controlling shareholders has fallen to 27 percent.

Of the six listed flagship entities, promoters of five have pledged holdings. Adani Ports, Adani Green Energy Ltd., Adani Enterprises Ltd. and Adani Transmission Ltd. are the key beneficiaries of release of pledge. The promoters, according to the group’s note to investors, reduced their outstanding debt exposure to Rs 8,500 crore from Rs 12,000 crore since March, leading to the release of pledge.

Through financial years 2016-2018, stakes of Adani Power and Adani Transmission were offered as collateral to get equity support. The promoters now, however, said they won’t resort to this method to fund future financing needs. That’s because these companies now have sufficient liquidity. The promoter group, according to the note to investors, has ample liquidity as well.

Also, various strategic asset monetisations in the last 7-8 months are expected to help. In October 2019, Total SA—one of the world’s biggest oil and gas processing firms—picked up a stake in Adani Gas. In December that year, Qatar Investment Authority invested in Adani Transmissions’ Mumbai power assets. In April this year, France’s energy giant Total invested in Adani Green Energy.

Analysts too lauded the group’s plan to reduce pledged promoter holding and consider this as one of the key re-rating catalysts for the flagship firm—Adani Ports.

Of the 26 analysts tracking the company, none of them have a ‘sell rating’. The average of 12-month price targets tracked by Bloomberg implies an upside of more than 25 percent. The analyst coverage on other Adani group companies is less than five.

Here’s What Analysts Have To Say

BofA Securities

  • Reduction in promoter pledges could allay investor concerns and expand Adani Ports valuations.

Kotak Securities

  • Guidance on pledging to become a non-issue by year-end; a meaningful positive.

Nomura

  • Progress in the reduction of underlying promoter debt at the group level is a key positive.

Citi Research

  • Sustained reduction in the promoter debt and associated pledge of shares would be an additional catalyst.

CLSA

  • Fall in pledged shares should reduce stake sale concerns for Adani Ports and add one more catalyst to buy it.
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