Indian tycoon Gautam Adani’s logistics unit has announced it will buy back up to $650mn in bonds, as his conglomerate fights to prove it has ample cash on hand after a short seller attack three months ago.
New York-based Hindenburg Research alleged in a January report that the ports-to-power conglomerate was manipulating its stock price and engaged in fraudulent accounting. The attack wiped more than $100bn off the group’s market value and caused credit agencies to downgrade their outlook on some Adani bonds.
Although the Adani group strenuously denied Hindenburg’s allegations, it pledged to slim its ballooning debt pile and slow its rapid expansion. Adani paid back $2.65bn of share-backed loans by mid-March, but this is its first bond buyback since the Hindenburg report.
Adani Ports and Special Economic Zone, the group’s ports and logistics division, will begin by buying up to $130mn of senior debt due in July 2024. After that tender offer is completed, it said it intended to purchase a similar amount for four successive quarters, mopping up the bond’s total outstanding principal of $650mn.
The dollar-denominated bond carries a coupon of 3.375 per cent. It has gained 1.7 per cent in the past 10 days and is now priced at 94.4 cents on the dollar. Adani Ports shares rose 1 per cent on Monday.
The buyback “is to partly pre-pay the company’s near-term debt maturities and to convey the comfortable liquidity position of the company”, Adani Ports said in a press release, adding it would fund the purchases from its cash reserves.
The bond buyback “should help improve market sentiment”, wrote Eric Liu, an analyst at Japanese bank Nomura.
Liu added that “ESG concerns remain on the table” and that Adani Ports should trade at a “meaningful differential” compared with similarly rated Indian companies.
Adani Ports chief executive Karan Adani, Gautam Adani’s eldest son, said in February that the company would halve its capital expenditure and settle debts worth Rs50bn (about $610mn) in the 2024 financial year, which began in April. As of March, he said Adani Ports net debt was Rs440bn ($5.4bn).
Adani Ports’ finance committee approved the buyback plan at a 4am Monday meeting India time, according to stock exchange filings. The logistics powerhouse is India’s biggest by volume and controls ports across the country and as far as Israel.
Read More: Adani Ports announces first bond buyback since short seller attack