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Adani pulls back on grand ambitions in new sectors after Hindenburg report bombshell


Two months on from its explosive report into Gautam Adani’s acquisitive conglomerate, short seller Hindenburg Research has left the Indian billionaire’s empire chastened and reevaluating its ambitions.

Hindenburg’s allegations of extensive, years-long corporate fraud at the Adani Group have wiped out about $125 billion in market value since January, spurring the tycoon to rein in plans to expand into new sectors, according to people familiar with the company’s inner workings.

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The group, which racked up one of India’s heftiest debt loads to fund fresh areas of growth, is pulling back from petrochemicals and is unlikely to go ahead with a planned $4 billion greenfield coal-to-polyvinyl chloride project in Mundra, western India, said the people, asking not to be identified on what are internal discussions.

It’s also dialing back on ambitions to dive further into aluminum, steel and road projects, said the people.

Instead, Adani — who has been closely associated with Indian Prime Minister Narendra Modi’s nation-building efforts — will revert his focus to core projects. They include power generation, ports and newer green energy initiatives, according to the people.

Even in these core areas, the billionaire will proceed in a fundamentally different style. After selling family shares to pre-pay $2.15 billion of margin-linked, share-backed funding taken out to finance a slew of acquisitions, Adani intends to avoid this sort of high-risk financing going forward, the people said.

Adani will stick to fund-raising methods like private bond placements and equity stake sales to specific investors — like its share sale to Rajiv Jain’s GQG Partners — to raise cash in a way that insulates the empire from volatile market movements, they said.

It’s a stark turnaround from 2022, when Adani’s stature and wealth sky-rocketed. At one point the former diamond trader was Asia’s richest man and his investments extended into sectors well be-yond his traditional heavy infrastructure bets — including media, women’s cricket, and data centers.
Putting debt-driven diversification on the back burner is now seen as key to restoring confidence. The group, which bought a controlling stake in TV channel New Delhi Television Ltd. in re-cent months as the first step in building what the tycoon then called “the Financial Times or Al-Jazeera of India, is now unlikely to make more purchases in the media space, according to the people familiar with Adani’s planning.
“There’s good reason to believe the company will draw back a bit in order to focus on damage control and other shareholder and wider investor concerns,” said Michael Kugelman, director of the South Asia Institute at the Washington-based Wilson Center. “Reputational considerations are critical.”
Adani has denied all of Hindenburg’s allegations, characterizing it as an attack on India. Representatives for the group didn’t respond to a request for comment. Last week, Adani Group said it expects funding for the greenfield coal-to-polyvinyl chloride project to be arranged in the next six months, rebutting a recent report in local media that the initiative had stalled.

The internal reckoning follows a number of fire-fighting moves by the Adani Group aimed at shoring up investor sentiment. In the days after the Hindenburg report, the conglomerate pulled a share sale and then proceeded to pre-pay $2.15 billion of debt to stem a mammoth selloff in stock of its Mumbai-listed units. It’s mounted a six-city roadshow aimed at rebutting the short seller’s claims and sold stakes in four companies to top emerging-markets investor GQG Partners.

The pullback is not entirely by choice, with some of its major partners scared off by the turmoil. Paris-based TotalEnergies SE is already putting a green hydrogen partnership project with the group on hold. In February, Adani also shelved plans to buy a coal mine in central India, and has decided against bidding for a stake in state-backed electricity trader PTC India Ltd., a highly symbolic retreat given how vested the group has been in developing India’s electricity infrastructure.

For years, Adani has tied his businesses to Modi’s development plans. The perception he enjoys a cozy relationship with India’s premier has prompted widespread accusations of crony capital-ism, and the billionaire has come under invigorated political attack following Hindenburg’s report.
The short seller’s allegations have made Adani’s relationship with Modi and the government fair game, with the opposition Congress Party saying the tycoon benefited from special state treatment. In a stunning move, Congress leader Rahul Gandhi was removed as a lawmaker last week in what he says was retribution for debating Adani’s ties to Modi.

Gandhi, a scion of India’s most famous political dynasty, was ousted from parliament on Friday, after a local court convicted him of defaming Modi during an election speech in 2019. Modi’s ruling Bharatiya Janata Party has said the law applies equally to everyone and Gandhi must face the consequences.

Adani, meanwhile, has consistently denied receiving any favoritism because of his association with the prime minister.

‘Short-term memories’

Hoping to sell the group’s turnaround message, Adani executives have been jetting regularly from the company’s headquarters in Ahmedabad to Dubai, London, and New York to personally meet about 100 investors in a month and convince them that the house is in order, according to the people.

Adani Group’s deleveraging efforts will see it slash net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) to as low as 2.5, from the current 3.1, resulting in some stark trade-offs, said the people.

Adani’s ports handle about a quarter of India’s cargo volumes, and the group has expanded overseas from Israel to Sri Lanka. But, in that flagship business, Adani’s plans to halve capital spending and prepay 50 billion rupees ($608 million) of debt to alleviate refinancing concerns, “will impede the company’s ability to boost earnings growth through infrastructure expansion and M&A,” Denise Wong, an analyst at Bloomberg Intelligence, wrote in a report earlier this month.

Whether reigning in its ambitions has an impact remains to be seen. Adani Group stocks slumped on Tuesday after India’s Economic Times reported the group is seeking to renegotiate the terms of $4 billion worth of loans, renewing concerns about the conglomerate’s ability to repay its debt and its access to funds. The losses were compounded by a story from business news website The Ken, which said regulatory filings showed banks have not yet released a large portion of Gautam Adani’s shares. The group denied both reports.

Adani’s actions are being closely watched by credit ratings companies. S&P Global Ratings earlier this month cited a litany of reasons why the group’s ratings on Adani units have downside risks, from the prospect it faces restricted access to funding to the chance it’s the subject of a probe that uncovers “serious wrongdoing.” India’s Supreme Court has set up a panel to investigate Hindenburg’s allegations.

Along with dramatically rising refinancing costs, sentiment is against Adani and “the risk premium will be certainly higher,” said Abhishek Jain, head of research at Mumbai-based brokerage Arihant Capital Markets Ltd., which has advised clients on Adani-related stocks. “The group is doing whatever they can do to re-store the confidence of the investors.”

Read more:

Adani stocks advance as group promptly rebuts debt repayment reports

India’s Rahul Gandhi accuses PM Modi of favoring Adani Group

Top India court sets up six-member panel to probe Adani market manipulation charges

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Abu Dhabi Overtakes Oslo for Sovereign Wealth Fund Capital in Global SWF’s First City Ranking

Today, industry specialist Global SWF published a special report announcing a new global ranking of cities according to the capital managed by their Sovereign Wealth Funds (SWFs). The findings show that Abu Dhabi is the leading city that manages the most SWF capital globally, thanks to the US$ 1.7 trillion in assets managed by its various SWFs headquartered in the capital of the UAE. These include the Abu Dhabi Investment Authority (ADIA), Mubadala Investment Company (MIC), Abu Dhabi Developmental
Holding Company (ADQ), and the Emirates Investment Authority (EIA). Abu Dhabi now ranks slightly above Oslo, home to the world’s largest SWF, the Government Pension Fund (GPF), which manages over US$ 1.6 trillion in assets. Abu Dhabi and Oslo are followed by Beijing (headquarters of the China Investment Corporation), Singapore (with GIC Private and Temasek Holdings), Riyadh (home to the
Public Investment Fund), and Hong Kong (where China’s second SWF, SAFE
Investment Corporation, operates from). Together, these six cities represent two thirds
of the capital managed by SWFs globally, i.e., US$ 12.5 trillion as of October 1, 2024.
For the past few decades, Abu Dhabi has grown an impressive portfolio of institutional
investors, which are among the world’s largest and most active dealmakers. In addition
to its SWFs, the emirate is home to several other asset owners, including central banks,
pension funds, and family offices linked to member of the Royal Family. Altogether, Abu
Dhabi’s public capital is estimated at US$ 2.3 trillion and is projected to reach US$ 3.4
trillion by 2030, according to Global SWF estimates.
Abu Dhabi, often referred to as the “Capital of Capital,” also leads when it comes to
human capital i.e., the number of personnel employed by SWFs of that jurisdiction, with
3,107 staff working for funds based in the city.
Diego López, Founder and Managing Director of Global SWF, said: “The world ranking
confirms the concentration of Sovereign Wealth Funds in a select number of cities,
underscoring the significance of these financial hubs on the global stage. This report
offers valuable insights into the landscape of SWF-managed capital and shows how it is
shifting and expanding in certain cities in the world.”

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AM Best Briefing in Dubai to Explore State of MENA Insurance Markets; Panel to Feature CEOs From Leading UAE Insurance Companies

AM Best will host a briefing focused on the insurance markets of the Middle East and North Africa (MENA) on 20 November 2024, at Kempinski Central Avenue in Dubai.
At this annual regional market event, senior AM Best analysts and leading executives
from the (re)insurance industry will discuss recent developments in the MENA region’s
markets and anticipate their implications in the short-to-medium term. Included in the
programme will be a panel of chief executive officers at key insurance companies in the
United Arab Emirates: Abdellatif Abuqurah of Dubai Insurance; Jason Light of Emirates
Insurance; Charalampos Mylonas (Haris) of Abu Dhabi National Insurance Company
(ADNIC); and Dr. Ali Abdul Zahra of National General Insurance (NGI).
Shivash Bhagaloo, managing partner of Lux Actuaries & Consultants, will his present
his observations in an additional session regarding implementation of IFRS 17 in the
region. The event also will highlight the state of the global and MENA region
reinsurance sectors, as well as a talk on insurance ramifications stemming from the
major United Arab Emirates floods of April 2024. The programme will be followed by a
networking lunch.
Registration for the market briefing, which will take place in the Diamond Ballroom at the
Kempinski hotel, begins at 9:00 a.m. GST with introductory comments at 9:30 a.m.
Please visit www.ambest.com/conference/IMBMENA2024 for more information or to
register.
AM Best is a global credit rating agency, news publisher and data analytics
provider specialising in the insurance industry. Headquartered in the United
States, the company does business in over 100 countries with regional offices in
London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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Future of Automotive Mobility 2024: UAE Leads the Charge in Embracing Digital Car Purchases and Alternative Drivetrains

-UAE scores show highest percentage among the region in willingness to purchase a car
completely online
– Openness to fully autonomous cars has grown to 60% vs previous 32%.
– More than half of UAE respondents in the survey intend to move to hybrid cars during
next car purchase, while less than 15% intend to move to fully electric car.
– UAE sees strong use of new mobility services such as ride-hailing (Uber, Careem, Hala
Taxi)
– The perceived future importance of having a car is not only increasing in UAE but is
higher than any other major region globally, even China

Arthur D. Little (ADL) has released the fourth edition of its influential Future of Automotive Mobility (FOAM) report, presenting a detailed analysis of current and future trends in the automotive industry. This year’s study, with insights from over 16,000 respondents across 25 countries, includes a comprehensive focus on the United Arab Emirates (UAE). The report examines car ownership, electric vehicles,
autonomous driving, and new mobility services within the UAE.

“The UAE is at the forefront of automotive innovation and consumer readiness for new mobility
solutions,” said Alan Martinovich, Partner and Head of Automotive Practice in the Middle East
and India at Arthur D. Little. “Our findings highlight the UAE’s significant interest in
transitioning to electric vehicles, favorable attitudes towards autonomous driving technologies,
and a strong inclination towards digital transactions in car purchases. These insights are critical
for automotive manufacturers and policymakers navigating the evolving landscape of the UAE
automotive market.”
Key Findings for the UAE:
1. Car Ownership:
o Over half of UAE respondents perceive that the importance of owning a car is
increasing, with the study showing the increase higher than any other major
region, including China.
o Approximately 80% of UAE respondents expressed interest in buying new (as
opposed to used) cars, above Europe and the USA which have mature used
vehicle markets

2. Shift to Electric and Hybrid Vehicles:
o While a high number of UAE respondents currently own internal combustion
engine (ICE) vehicles, more than half intend that their next vehicle have an
alternative powertrain, with significant interest in electric and plug-in hybrid
(PHEV) options. Less than 15% plan to opt for pure battery electric vehicles
(BEVs).

3. Emerging Mobility Trends:

o Ride-hailing services are the most popular new mobility option among UAE
residents, with higher usage rates than traditional car sharing and ride sharing.
The study indicates a strong openness to switching to alternative transport modes
given the quality and service levels available today.

4. Autonomous Vehicles:
o UAE consumers are among the most open globally to adopting autonomous
vehicles, with a significant increase in favorable attitudes from 32% in previous
years to 60% this year versus approximately 30% in mature markets. Safety
concerns, both human and machine-related, remain the primary obstacles to
broader adoption.

5. Car Purchasing Behavior and Sustainability:
o The internet has become a dominant channel for UAE residents throughout the car
buying process, from finding the right vehicle to arranging test drives and closing
deals. UAE car buyers visit dealerships an average of 3.9 times before making a
purchase, higher than any other region in the world, emphasizing the need for
efficient integration of online and offline experiences.
o Upwards of 53% of respondents from the region would prefer to ‘close the deal’
and complete the purchase of their car online, which is the highest for any region
in the world.
o Sustainability is a key factor cited by UAE consumers as influencing car choice.
The UAE scored among the top half of regions, highlighting the importance of
environmental considerations.

“Our study confirms the promising market opportunities for car manufacturers (OEMs) and
distributors in the UAE” commented Philipp Seidel, Principal at Arthur D. Little and co-Author
of the Global Study. “Consumers in the Emirates show a great and increasing appetite for cars
while being among the most demanding globally when it comes to latest vehicle technologies
and a seamless purchase and service experience.”
The comprehensive report, “The Future of Automotive Mobility 2024” by Richard Parkin and
Philipp Seidel, delves into global automotive trends and their impact on various regions,
including the UAE. This study is an invaluable tool for industry stakeholders seeking to navigate
and leverage the dynamic changes driving the future of mobility.

 

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