Adani Ports is considering repaying $605 million in debt to quiet investors

(Bloomberg) – Gautam Adani’s port division is considering repaying about 50 billion rupees ($604.6 million) in loans as the ailing Indian tycoon seeks to deleverage after a short seller attack eroded his empire’s financial health and corporate governance scrutinized.

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Adani Ports & Special Economic Zone Ltd. is considering repaying the entire loan and prepaying that amount in the year beginning in April, which would improve its ratio of net debt to earnings before interest, taxes, depreciation and amortization by about 2.5 times, an earnings statement said Tuesday. The ratio is currently a little more than threefold.

India’s largest private port operator, which reported a fall in profits in its latest quarterly results, also said it will roughly halve its capital expenditures in the next fiscal year compared to the current year.

The developments come just a day after a group statement said the billionaire and his family had prepaid $1.11 billion in loans backed by shares in three group companies, including Adani Ports, to ease fears of the to disperse investors. Two other companies in the ports-to-power conglomerate that reported earnings on Tuesday showed strong earnings growth, which may also calm nervous traders.

In another possible sign of encouragement, people familiar with the matter said that Oaktree Capital Management, one of the world’s largest opportunistic lending firms, and Davidson Kempner Capital Management were among those buying up bonds linked to the Adani empire in recent weeks.

The conglomerate’s finances have come under scrutiny after US short seller Hindenburg Research accused the Adani Group of accounting fraud and market manipulation, erasing more than $100 billion from its market cap.

Explainer: Who is Adani and what are Hindenburg’s claims?: QuickTake

The Adani Group has repeatedly denied the allegations.

“In order to uphold the principles of good corporate governance, the management of Adani Group companies is considering the appointment of independent firms/agencies” to deal with issues of legal compliance in related party transactions and internal controls, among other things, according to the the documents of the companies, Ambuja Cements Ltd. and Adani Green Energy Ltd. “Management will consider necessary actions as appropriate.”

“Allay Concerns”

Adani Ports’ guidance “could allay concerns about the company’s liquidity and debt, although governance and regulatory risks are likely to remain,” wrote Sharon Chen, an analyst at Bloomberg Intelligence. “It could also provide reassurance that loans to related parties will not be significantly increased to support the rest of the group as free cash flows are earmarked for debt service.”

The listed companies of the Adani conglomerate, which was forced to sell $2.5bn of shares last week, are citing the resilience of the companies’ operations.

Adani Ports reported a 16% fall in profit to Rs 13.2 billion for the latest quarter, missing analysts’ estimate of around Rs 15 billion. Revenue rose 18% from the same period last year to Rs 47.9 billion but also fell short of estimates. Capital expenditure for the year beginning April is fixed between Rs. 40 billion and Rs. 45 billion.

Profits of Adani Green Energy, one of the conglomerate’s most leveraged companies, more than doubled to Rs 1.03 billion from Rs 490 million in the same quarter last year. Total revenue rose 54% to Rs.22.6 billion while total expenses rose 45%, the company said in an IPO filing. The renewable energy company is on track to complete 8,300 megawatts of capacity by March, it said, adding that bond commitments are within set limits.

Ambuja Cements, the larger of the two local cement producers that the Adani Group acquired from Holcim Ltd last year. reported a better-than-expected quarterly profit of Rs.3.69 billion, up 46% from the same period last year. Revenue rose 10% to match estimates of Rs 41.3 billion, according to a separate filing.

The cement maker remains debt-free and expects “cement demand to continue growing in the coming quarters on increased infrastructure activity,” its chief executive officer, Ajay Kapur, said in the filing.

Adani Transmission Ltd. posted a profit hit on Monday as net income surged 78% – the only other company in the group to have reported results so far.

(Updates to add more details)

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