Construction Industry News
Gautam Adani's plan to raise at least $5 billion in equity capital aims to quell two of the most common criticisms of the Indian magnate's growing empire: high debt ratios and a limited investor base.
After four years of startling gains - some shares of Adani Group are up more than 2,000% - Asia's richest person is embarking on a fundraising campaign that will likely include a local share sale, as well as a buy-in from major investment funds in the Middle East and Canada. A capital injection of this size is expected to help the conglomerate deleverage and Bloomberg Intelligence sees a successful group-wide capital raise to support the companies' dollar bonds.
“The fundraising by Adani Group puts the naysayers in their place,” said Sanjiv Bhasin, director of Mumbai-based brokerage IIFL Securities Ltd. "He is embarking on a new fundraising effort that will boost the group's credibility and allay investors' fears."
Adani directors are seeking to court global sovereign wealth and pension funds, including Mubadala Investment Co., Abu Dhabi Investment Authority and the Canada Pension Plan Investment Board, Bloomberg reported Wednesday. The total size of the fundraising could reach $10 billion, according to people familiar with Adani's thinking.
The board of the flagship company, Adani Enterprises Ltd., will meet on Friday to discuss fundraising opportunities. Adani Enterprises trades at a valuation of more than 160 times its one-year future earnings. By comparison, Reliance Industries Ltd. — India's largest company by market value — is about 21 times that, according to data compiled by Bloomberg.
Adani Enterprises was added to India's benchmark Nifty 50 index in September and the sale of shares is likely to generate some passive funds. But just adding more strategic or passive investors is unlikely to increase liquidity, according to Alice Wang, a portfolio manager at Quaero Capital in London, who estimates the company's free float at about 10%, much lower than the reported 27%.
The current plans will not only "test the appetite" but also "pave the way for further capital raisings by institutional investors," Teli said. "The group is in several businesses that are money hungry and have long gestation periods and may need more funds soon."
