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Cash-hungry Adani utility shows funding urgency to power India


As shares of Gautam Adani’s conglomerate recover from an epic rout, the big question looming over the Indian tycoon is whether he can convince investors and lenders to back his capital-hungry businesses with fresh cash.

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Few parts of Adani’s empire underscore the urgency of that funding for the billionaire — and also for the government of Indian Prime Minister Narendra Modi — better than Adani Transmission Ltd.

India’s largest private utility is a key player in Modi’s pledge to provide power to every Indian home. In a media blitz on Monday, it touted itself as capable of “distributing electricity to every corner of the country.”

Yet the company faces a funding gap which may force it to infuse as much as $700 million by March 2026 to fulfill existing project commitments, according to the Indian unit of Fitch Ratings — and that’s before taking into account ambitions to expand even further in coming years.

The funding needs of infrastructure builders like Adani Transmission are a major factor behind the conglomerate’s race to return to business as usual, after months of damage control and denying US short seller Hindenburg Research’s allegations of widespread corporate malfeasance.

The stakes are also high for Modi, who faces national elections in early 2024 and has made infrastructure a core plank of his nation-building agenda.

Adani Transmission, which went from being a fledgling to India’s largest private utility in seven years, has grown its asset portfolio 3.6 times to 19,779 circuit kilometers (ckm) across 33 projects.

Of these, 13 projects are currently underway, but many face delays or cost overruns, including the largest one: the Warora-Kurnool Transmission line that runs through three large southern Indian states.

Others have been beset by adverse weather, pandemic-era disruptions or legal wrangles — common issues in infrastructural projects in India which makes the Adani group the rare private company that has been scaling up aggressively in this space.

With India planning to add more than 27,000 ckm of transmission lines by 2025, the company’s continued expansion will be crucial for the national goal.

The utility company earlier this month announced plans to raise as much as $1 billion — one of two Adani companies looking to issue new shares for the first time since the short seller crisis which wiped more than $100 billion off the empire’s market value.

“Adani Transmission has always been aggressive on capex so the $1 billion fundraising will help them maintain growth momentum at a time when the group as a whole has had to soften their targets to come out of this logjam,” said Kranthi Bathini, director of equity strategy at WealthMills Securities Pvt.

“It might have to also raise additional debt to finance their capex requirements as the transmission business has high working capital needs,’” he said.

Capital infusion required by March 2026 from the company in its ongoing projects has surged as much as 60 percent to 57.95 billion rupees ($700 million) compared to what was envisaged before, India Ratings and Research, the local unit of Fitch Rating’s, said in a March 30 statement.

This is due to cost overruns or the borrowings not being enough to support the projects, forcing the utility firm to invest more.

India Ratings revised its outlook on Adani Transmission to “negative to reflect this uncertainty around debt funding secured for the under-construction transmission lines.”

Any shortfall will require the company to invest more “to meet project completion deadlines, potentially creating cashflow mismatches over FY24, it said.

An Adani Group spokesperson said in an email that the conglomerate does “not comment on routine business matters.”

“All public disclosures on business matters are disclosed when appropriate, the spokesperson said in response to queries on how Adani Transmission plans to plug the funding gap.

‘Best Possible Assets’

Some high-profile investors are convinced about the large role units like Adani Transmission play in the country’s development.

GQG Partners’s Chief Investment Officer Rajiv Jain, one of the first investors to show support for the conglomerate after the Hindenburg attack, told Bloomberg last week that GQG had raised its investment in the Adani empire and its holdings were now worth $3.5 billion.

Jain said he is willing to buy into the group’s new share sale because “these are the best possible infrastructure assets available in India.”

Praising the conglomerate for its “quality of execution,” Jain said, “Who else in India is creating such quality infrastructure assets at this scale?”

Very few private sector firms in India have the risk appetite and ability to withstand the vagaries of infrastructure development in the sprawling, unwieldy country like Adani does.

Infrastructure projects are funded by a mix of debt and capital infusion, or equity, from the company. Delays, pricier inputs or legal challenges also push up project costs.

Its largest project by length, Warora-Kurnool Transmission line, or WKTL, is facing a cost-overrun worth 6.7 billion rupees due to higher input and execution costs, India Ratings said at the end of March. The company “management confirmed that it will fully support the project to fund the entire cost-overrun,” it said in the statement.

Another project ——Adani Electricity Mumbai Infra Ltd. or AEMIL ——was slow to start as the Tata Group mounted a yearlong legal challenge against Adani’s license.

Eight Adani transmission lines are expected to be operational by March 2024 after some delay, according to data compiled by Bloomberg from company presentations and government websites.

Favorable orders

The Adani Group’s effort to revert to pre-Hindenburg growth is gaining momentum from recent developments.

Besides being given reprieve earlier this month by a Supreme Court panel that found no evidence of regulatory failure or market manipulation so far in the episode, Adani Transmission has also won favorable regulatory orders to raise electricity tariffs in its operating projects to recoup past revenue shortfalls.

It’s another example of the company’s ability to navigate the difficulties of infrastructure building in India, as utilities generally cannot recoup higher costs incurred during project execution from end users as electricity tariffs are fixed through auctions. They need to petition the central or state regulator to approve higher tariffs, which usually involves a lengthy legal process.

The utility’s closely held subsidiary, Adani Electricity Mumbai Ltd., got a favorable order at the end of March from the state power regulator which allowed it to raise tariffs charged to consumers by 2.2 percent in financial year 2024 and by 2.1 percent in 2025.

It reported an 85 percent jump in profit to 4.4 billion rupees for the quarter ended March 31, boosted partly by a one-time income from favorable regulatory orders. Revenue rose 17 percent to 30.31 billion rupees, the company said in a late night Monday statement to exchanges.

Nevertheless, many investors are still waiting to see if the unit can find the funding it needs before buying back into the stock. Its shares, which are down 69 percent this year, have been one of the slowest to recover from the Hindenburg rout among the group’s listed entities. The stock slipped as much as 4.8 percent on Tuesday, ahead of its exclusion from MSCI India Index from May 31.

“For new buying to take place, there needs be a new investor,” said Deven Choksey, chief executive officer at local brokerage KR Choksey Shares & Securities. “We will have to wait for the proposed equity fundraise to conclude to see an appreciation of the stock.”
Read more:

Adani Group stocks surge after court panel finds no proof of price manipulation

India regulator ‘draws a blank’ in foreign links probe into Adani group

Two Adani Group firms to raise up to $2.57 billion from the market

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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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