The Adani Group has taken action to suspend work on a Rs 34,900 crore petrochemical project at Mundra in Gujarat. Sources reported that this move is to focus resources to consolidate operations and address investor concerns stemming from a damning report by a US-based short seller. Earlier this year, the group’s main company Adani Enterprises Ltd established Mundra Petrochem Ltd as a wholly-owned subsidiary to construct a greenfield coal-to-PVC plant at APSEZ land in Kutch district of Gujarat.
The apples-to-airport group is hoping to claw back and calm jittery investors and lenders after Hindenburg Research’s January 24 report alleging accounting fraud, stock manipulation, and other corporate governance lapses chopped off about USD 140 billion from Gautam Adani’s empire’s market value.
By repaying some loans, consolidating operations, and disputing allegations, the comeback strategy addresses investor concerns about debt.
A reevaluation of projects is being done based on cash flow and available financing in response to the allegations leveled by Hindenburg.
Two sources familiar with the matter said the group has decided not to pursue the 1 million tonne per year Green PVC project for now.
Vendors and suppliers have been notified to “suspend all activities” immediately.
According to the mails seen by PTI, the group has asked them to “suspend all activities of the scope of work and perform all obligations” for Mundra Petrochem Ltd’s Green PVC project.
The management, the company said, was “reevaluating various projects/s being implemented at group level in different business verticals” as a result of the “unforeseen scenario”. Some of the projects are being reevaluated for their continuation and timeline revision in light of future cashflow and finance.”
According to a Adani group spokesperson, AEL will evaluate the status of growth projects in primary industry vertical over the next few months.
Each of our independent portfolio companies has a very strong balance sheet. The company has industry-leading project development and execution capabilities, strong corporate governance, secure assets, and strong cash flows. Our business plan is fully funded. In order to create value for our stakeholders, we remain focused on implementing our previously outlined strategy,” the spokesperson said.
Over the next few months, AEL will evaluate the status of growth projects in the primary industry vertical.
Poly-vinyl-chloride (PVC) was to be produced at the unit at a rate of 2,000 KTPA (kilo tonne per annum), requiring coal imports from Australia, Russia, and other countries of 3.1 million tonne per annum (MTPA).
It is the third-most widely produced synthetic polymer of plastic in the world. Applications include flooring, sewage pipes, electrical wire insulation, packaging, aprons, and packaging.
Having a near stagnant domestic PVC production at 1.4 million tonnes, India is dependent on imports to meet its PVC demand of around 3.5 MTPA.
There were allegations in the Hindenburg report that alleged “brazen stock manipulation and accounting fraud” as well as the use of offshore shell companies to inflate stock prices. The Adani group has denied all of the Hindenburg allegations, calling them “malicious”, “baseless” and a “calculated attack on India.”
Several plans to bid for stake in power trader PTC were shelved as part of the group’s comeback strategy, including canceling a Rs 7,000 crore coal plant purchase. By pledging promoter stakes in group companies, the company has repaid some debt and prepaid some of the funds raised.
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