Adani Green Energy to raise ₹6,000 crore via share sale

It is said that a lot can change in a short span of time. Till the Hindenburg report came out in late January 2023, the Adani group looked almost unstoppable in its aggressive capex plans. However, post the Hindenburg Report, the Adani group lost close to $130 billion in market cap. The fall was so sharp and severe that the flagship Adani Enterprises had to even shelve its fund raising plans through the FPO route. However, it looks like the Adani group now wants to make up for lost time. It is putting a lot of its capex plans back on track and that means; it is likely to once again hit the markets to raise funds.

In the latest move, the renewable energy arm of the Adani group, Adani Green Energy Ltd, plans to raise close to ₹6,000 crore. The company is already in talks with global fund managers to raise ₹5,000 to ₹6,000 crore. It must be remembered that Adani Green Energy is India’s largest renewables company with aggressive plans to scale up its capacity. It is now reviving most of the capex plans that it had put on hold or shelved in the aftermath of the sharp fall in the price of Adani group stocks. The fund raising will be done through the issue of fresh shares as well as the promoters selling part of their stake in the company. For instance, the family holds close to 60% in Adani Green Energy and could look to hive off 3-4% of their holdings.

A lot changes in a short time span

In January 2023, the Adani group companies had put capex and fundraising plans on hold after a rather scathing report put out by the US based Hindenburg Research. Now Hindenburg is a fairly renowned short seller and had even admitted to taking short positions in the Adani group companies ahead of the release of the report. The report had not only pulled up the Adani group companies for too much reliance on debt, but also had made allegations of stock price manipulation and accounting frauds against the group. The report had also raised serious issues of lapses in corporate governance. This was too much to digest in the midst of its frenetic growth plans and it led to a huge depletion in value for the group. At that point, most of the capex plans had been put in the backburner.

Things often change very fast in this industry and the plan by Adani Green to raise up to ₹6,000 crore of funding is a signal of exactly that. Considering that the previous FPO had been cancelled, Adani group company will raise funds through a qualified institutional placement (QIP). Details of the fund raising program are expected to be announced post the Adani Green board meeting scheduled on 24th May 2023. The QIP is expected to be launched in the next few months. It may be recollected that, earlier, Adani Enterprises and Adani Transmission had already announced grand plans to raise $2.5 billion via QIPs. In this case, the proceeds of the Adani Green QIP will be used for debt reduction and for revival of the capex plans. Adani Green is keen to rapidly execute its growth plans in the mega solar and wind energy projects.

Stock price recovery helps fund raising plans

In a sense, the fund raising plans have been aided by the steady recovery in the stock price. For instance, the stock of Adani Green is up 125% at ₹989 from its 52-week low touched on 28th February 2023. In late January and February, the stock of Adani Green Energy had lost close to 75% from its pre Hindenburg levels. This fund raising plan will help Adani Green Energy to scale up its operational renewable energy production capacity by 5.6X from 8.10 GW now to 45 GW by 2030. Currently, the project underway is to add operational capacity of 12.3 GW of capacity.

In the past, Adani Green Energy has largely synced its plans with that of the Indian government. For instance, the government has already laid out aggressive plans to expand India’s renewable energy capacity from 110 GW to 200 GW by FY27 and further to 305 GW by FY30. In a sense, Adani Green Energy has been a proxy for the renewable plans of the Indian government.

Using funds to reduce debt

One of the main ideas of the fund raising program, apart from sustaining capex, will be to repay existing debt. As of March 2023, Adani Green had net debt (net of cash) of ₹51,221 crore. Out of this debt pile, Adani Green has plans to repay ₹45,436 crore of long-term debt by FY33. It also has ₹39,600 crore of operational debt, taking the gross debt of the company to over ₹85,000 crore. The chunk of the repayments for Adani Green Energy are scheduled in FY25, when nearly ₹22,454 crore of debt becomes due. It plans to have a series of fund raising plans to ensure that it is well funded to repay this debt.

To a large extent, this combination of reduced debt and putting capex plans back on track will help to bring back the confidence of investors. More so, since the company is already in the process of setting up the world’s largest hybrid cluster project of 15 GW across 70,500 acres in Khavda in Gujarat. The company is expected to report steadily higher revenues and operating profits in the next few years. In the last two weeks, the Adani Group has kicked off various fund-raising plans. The Supreme Court order has come as a refreshing relief for the group. Even as Adani group wants to come clean on the allegations, it realizes the need to show conservatism on debt and consistency and resilience on growth. That is where the latest round of funding will help.