Adani to use FPO proceeds for capex, debt payment

Adani to use FPO proceeds for capex, debt payment

With the massive Rs 20,000-crore FPO, Adani Enterprises will get to fund chairman Gautam Adani’s various ambitions as the flagship company will look to use the proceeds for capital expenditure requirements and pay off some debt of its units. Out of the total proceeds, the company will use Rs 10,869 crore to fund green hydrogen projects, airports facilities and greenfield expressways.

The company will also use Rs 4,165 crore to repay the borrowings of three of its units – Adani Airport Holdings, Adani Road Transport and Mundra Solar.

In September, the group announced plans to invest $70 billion in the clean energy sector, including green hydrogen. A further $23 billion is planned in green energy over the next 5-10 years. It also has plans to set up a 45-gigawatt renewable energy production capacity by 2030, entailing an investment of $20 billion.

As per target guidance provided by CFO Robbie Singh, the group is aiming to produce hydrogen at the lowest cost. “Our first and foremost objective is to produce the hydrogen at lowest capex. We are confident that we will produce the hydrogen at one of the lowest cash costs anywhere in the world,” Singh said in November in an analyst conference call.

Besides green energy investments, the infrastructure sector will also be in focus. While transport utility will see a $12-billion investment, the road sector will see an infusion of $5 billion. Electricity transmission is set to witness capital of $7 billion. The group’s data centre business would entail $6.5 billion, while the airport business will see $9-10 billion investments.

Adani’s debt structure has moved away from banks and towards bonds. From 55% in FY16, public sector banks’ share in the group’s debt structure stood at 25% in FY22. Private banks share also stood reduced to 8% in FY22 from 31% in FY16.

From zero exposure to bonds in FY16, the share of bonds in the group’s total debt profile stood at 37% as of FY22 end.

The group’s net debt stood at Rs 1.61 trillion as on March 31, 2022, which was nearly double compared to Rs 82,600 crore as on March 31, 2016. The group claims that its net debt to Ebitda ratio has come down to 3.2 from 7.6. The group has an overall rating of AA-.

In early September, debt research firm CreditSights published a note where it flagged elevated leverage for Adani Green Energy and the risk of future acquisitions hurting the credit profile of Adani Port and Special Economic Zone. The Fitch group firm later said that it had ‘discovered calculation errors’ in the debt report on the two Adani Group companies following a conversation with the management.