Adani group may go slow on capital spending plans

One of the casualties of the Adani Hindenburg saga, according to reports, is that the Adani group may look to trim its capital spending plans. In the last one week, Adani Enterprises not only called off its $2.5 billion follow-on public offer (FPO), but also called off its Rs1,000 crore bond issue. The FPO was obviously withdrawn after large institutional investors and anchors objected to the idea of going ahead with the public issue after the stock price had fallen so sharply below the anchor allotment price.

While Adani group has come forward to prepay some of its loans and also offer more collateral for its stock pledges, it has bigger things to focus on. Firstly, the aggression of its green energy plans and massive capex outlays may have to be toned down for the time being. Alternatively, the government may keep its capex plans intact, but move the time frame for fructifying such investments from 12 months to about 18-24 months, to be more realistic.

It is also likely that the fall may force the group to look at alternate funding options like internal accruals, promoter funding and private placements to bankroll some of its key projects. The good news is that the domestic lenders will continue to allow the Adani group to continue using the sanctioned limits, although they may not sanction fresh limits for now. 

The aggression of capex was based on the rich valuations that the group stocks commanded. With nearly $110 billion or 50% of market cap wiped out, the group has to be a little more cautious about using equity as currency.