Billionaire Gautam Adani’s group has pledged about $13 billion worth of shares in two Indian cement companies just days after completing its acquisition of Holcim Ltd., reflecting the world’s second-richest man’s appetite for capital as his port-to-power conglomerate rapidly expands
stakes in two of those companies-about 57% of ACC Ltd and 63% of Ambuja Cements Ltd.-are encumbered “in favour of certain lenders and other financiers,” according to separate filings with Indian equities.
Changes in the Hong Kong branch of Deutsche Bank AG The store is a so-called non-sale bond, which means that the shares cannot be sold until the debt is paid.
The pledge comes as the son’s ambitious deals in several new sectors, from green energy to media, raise concerns about Adani Group’s high debt levels.
While the conglomerate has begun to reduce some liabilities in its listed companies, other units still have high debt ratios that stand out from global benchmarks.
The acquisition of Holcim earlier this year marked Adani’s entry into the cement business, and the tycoon plans to double his company’s annual capacity by 2027 as a result of the deal, which made his conglomerate India’s second-largest construction materials producer.
The acquisition will enable Adani Group to raise about 110 billion rupees ($1 billion) in cash from the two listed companies, Jefferies Financial Group Inc. said.
“I wish I am wrong but this modus operandi reminds me of the time of early nineties. At that time shares purchased were mortgaged to borrow money from banks, and that loan proceeds were used to buy more shares. The newly purchased shares were again mLiortgaged to borrow further money, and new loan proceeds were used to buy more shares. The process continued.” said Mr. Raj Kamal Bindal, Independent Director at Bharat Heavy Electricals limited.
These types of acquisitions may generate revenue, but they raise questions about the overall strategic move .
Previous Offering by Adani Group to Acquire Ambuja Cement and ACC
The plan to acquire Acc was ongoing since May, and various offers were made by Adani Group before the final aquisition.
Swiss construction materials company Holcim and its subsidiaries own 63.19 percent of Ambuja Cements and 54.53 percent of ACC, of which 50.05 percent is through Ambuja Cements.
Under the current agreement, Adani Group would take over Holcim’s 63.06 percent stake in Ambuja and acquire a direct 4.48 percent stake in ACC. The new bids would make the Adani group the parent company of India’s two largest cement companies. The deal marks the port-energy conglomerate’s entry into the cement industry.
The group announced in May that it would make an open offer at Rs 385 a piece for Ambuja Cements and Rs 2,300 a piece for ACC, according to the company. Adani Group seeks to acquire 51.63 million equity shares of Ambuja Cements, or 26 percent of its extended share capital (voting share capital), for a total of Rs 19,879.57 crore in this transaction.
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