The Adani group led by billionaire Gautam Adani is taking a pause on fresh acquisitions as it recalibrates its strategy in the rapidly changing global and domestic macroeconomic scenario. According to people in the know, the group which is in the process of acquiring several large infrastructure assets, is having a rethink on some deals which include an potential investment in the Krishnapatnam and Dighi ports and a stake buy in cold chain logistics firm Snowman Logistics.
The group is also expected to delay the takeover of Guwahati and Jaipur airports which the group successfully bid for last year. Similarly, a long-awaited transfer of solar power assets from the Essel group to Adani’s renewable energy arm is also pending.
Adani Ports and Special Economic Zone (APSEZ) announced on 3 January that it would buy a 75% stake in Krishnapatnam Port Company Ltd, promoted by the Hyderabad-based CVR Group which runs the deepwater port in Andhra Pradesh’s Nellore district, for ₹13,500 crore. The deal was to close in March. Besides this, APSEZ also emerged the highest bidder, offering ₹650 crore to extinguish the debt and take over the under-construction Dighi Port in Maharashtra under the corporate insolvency resolution process.
“APSEZ is trying to renegotiate deal terms by about 30% for Krishnapatnam,” a person aware of discussions between the Adani and CVR groups, told Mint. “Dighi, on the other hand, needs another Rs3,000-Rs3,500 crore to finish construction and build connecting road and rail networks. With the economy contracting post the spread of covid-19, port traffic has fallen as well, even though they were allowed to operate through the lockdown as an essential service.”
In April, cargo movement at the 12 major Indian ports fell 21% year-on-year, according to the Indian Ports Association. “It wouldn’t make sense to make a massive investment into Dighi just yet, when existing Indian ports will be struggling to regain their market shares,” the person said.
Likewise, Adani group’s plans to buy a 40.25% stake in cold chain logistics firm Snowman Logistics through the former’s subsidiary Adani Logistics Ltd (ALL) has also hit a hurdle people cited above said. In December 2019, ALL had struck a deal to acquire the 40.25% promoter stake in Snowman Logistics Ltd, along with an open offer to acquire another 26% from public shareholders. Adani was to shell out Rs296 crore to acquire the promoter share and another Rs191 crore for the public shareholding. While the open offer was completed, the two parties could not close the sale of the promoter share by the agreed timeline of 31 March, believed to be because of a valuation mismatch.
In February 2019, Adani Enterprises Ltd (AEL) won the 50-year concession rights to operate, maintain and upgrade 6 public airports run by the Airports Authority of India. AEL had announced a Rs26,000 crore capital expenditure plan into the six airports over the following five year. In February 2020, AEL signed the concession agreements to develop Ahmedabad, Lucknow and Mangaluru airports while the transfer of Guwahati and Jaipur airports remain. The ownership transfer of the sixth airport in the first auction lot — Thiruvananthapuram — has been legally challenged by the Kerala State Industrial Corporation.
Meanwhile, a 2019 agreement between Adani Green Energy and debt-heavy Essel Infrastructure to buy out the latter’s 685MW solar power portfolio is yet to be completed, with only 205MW so far changing hands.
The Adani group declined to respond to emailed queries from Mint regarding the status of these transactions. Mint did not receive a response to queries sent to the CVR group and Essel Infrastructure. Gateway Distriparks, the holding company for Snowman Logistics, has initiated arbitration proceedings against ALL after the latter did not meet the conditions necessary to close the transaction by the 31 March deadline, Gateway Distriparks said in a regulatory filing. ALL has denied the correctness of these claims.
“The market dynamics and prospects for businesses in transport and logistics have changed a lot since the pandemic struck,” Sandeep Upadhyay, MD and CEO, Centrum Infrastructure Advisory, said. “Covid is a black swan event and the net present value calculations that decided deal terms earlier would have changed now. In deals where the agreement has been signed but they’re still a while away from financial closure and transferring money, assets buyers are trying to open up contracts to renegotiate terms.”
Source: Live Mint