Adani in talks to prepay share pledges to boost confidence amid stock rout

By P R Sanjai and Suvashree Ghosh,

Embattled billionaire Gautam Adani is in talks with creditors to prepay some loans backed by pledged shares as he seeks to restore confidence in his conglomerate’s financial health, people with knowledge of the matter said.

The move would see lenders release some of the stock in Adani Group companies that was pledged as collateral and repayment could take place as early as this weekend, the people said, asking not to be identified as the details are private.

Also Read | Modi government distances itself from Adani’s troubled Bangladesh deal

The conglomerate has pledged 5.5 per cent of its listed units’ shares overall in loans, they said.

While there’s been no suggestion that Adani Group entities would struggle to make dollar debt payments due soon and the group has flagged interest coverage ratios that show it has the ability to meet such obligations, the move is an attempt to restore confidence after some banks stopped accepting the conglomerate’s securities as collateral in client trades.

The Indian group hasn’t faced margin calls on these pledges and is seeking the prepayment proactively, one of the people said.

Also Read | Adani backers from New York to Tokyo dissect and limit exposure

An Adani Group representative didn’t immediately reply to an email seeking comment.

Adani Ports and Special Economic Zone Ltd made payments on dollar bonds as scheduled Thursday, a modicum of solace for investors shaken by the turmoil. All 15-dollar debt securities of the group also advanced on Friday.

Still, there remains considerable uncertainty over the group’s cash flow and fiscal positions after it withdrew a Rs 20,000 crore ($2.4 billion) share sale this week, meant to inject liquidity and bring down leverage.

Also Read | Adani’s $58 billion wealth wipeout in six days has few parallels

Wealth Wipeout

The key priority for the prepayment is to remove any concern about margin calls, the people said, adding that Adani officials will speak with investors in the coming days and will make all payments on time.

The tycoon’s businesses have lost $108 billion of market value in a week, one of the biggest wipeouts in India’s history. Adani, who last year became the world’s second-richest man, has dropped out from the world’s 10 richest lists since short-seller Hindenburg Research accused his companies of fraud to inflate revenue and stock prices.

Some market participants now see an opportunity in the selloff. Goldman Sachs Group Inc. and JPMorgan Chase & Co. have told some clients that bonds related to Adani can offer value due to the strength of certain assets