The Adani Group released around Rs 26,500 crore of pledged shares in fiscal 2024 across its five listed companies, marking the fourth straight year of such releases. Analysts attribute this trend to improved cash earnings, following similar releases of over Rs 15,000 crore each in FY23 and FY22 and Rs 1.27 lakh crore in FY21.
Ambareesh Baliga, an independent market analyst, said improved cash flows have enabled the group to release pledged shares, and that institutions raising stakes in some of the stocks was also a positive.
In FY24, Adani Power witnessed the largest release of promoter-pledged shares, followed by Adani Ports & SEZ and Adani Green Energy Ltd. In March 2023, Adani Power had pledged 72.72 crore promoter shares, which has now reduced to 44.56 crore, marking a release of around 28.16 crore shares valued at Rs 15,000 crore.
Similarly, Adani Ports & SEZ had 6.14 crore promoter-pledged shares in March 2023, which decreased to 2.42 crore by March 2024, releasing around 3.72 crore shares valued at Rs 4,989 crore. For Adani Green Energy, the number of promoters pledged shares decreased from 3.17 crore to 90.86 lakh, resulting in the release of 2.26 crore shares worth Rs 4,149 crore.
In addition, other group companies such as Adani Energy Solutions and Adani Enterprises saw the release of around Rs 913 crore and Rs 1,402 crore promoter-pledged shares. In March 2023, Adani Energy Solutions had 3 crore pledged shares, which decreased to 2.11 crore, while Adani Enterprises had 50.63 lakh shares pledged, which decreased to 6.71 lakh shares by March 2024, resulting in releases of 8.9 crore and 43.93 crore shares.
In February, Adani Group said its portfolio companies saw a 34 percent EBITDA increase to Rs 79,000 crore by December 2023, 2.5 times more than in 2021. The growth, driven by a stable infrastructure platform, generated Rs 66,208 crore, accounting for 84 percent of the portfolio's EBITDA. The portfolio remains conservatively leveraged with a net debt to EBITDA ratio of 2.5x, debt coverage at 2.1x, and gross assets to net debt at 2.5x. The group maintains a healthy cash balance of Rs 44,572 crore.
The group had said the market access remains strong, with investments totaling Rs 91,290 crore drawn by various portfolio companies from international and domestic banks. Emerging infrastructure businesses, including green hydrogen, airports, and roads under Adani Enterprises Ltd., contribute 45 percent of the company's total EBITDA.
"With the group's size doubling every four to five years, improved earnings are easing cash flow challenges,” said Deven Choksey, MD, DR Choksey FinServ.
“This has prompted them to release debt. The EBITDA to debt ratio, now at around 2.5 times, is manageable. As debt reduces over the next two to two and a half years with substantial EBITDA growth, lenders worldwide will likely be more comfortable extending loans. Hence, the release of pledge shares," he said.
Sunny Agrawal, deputy vice-president and head of fundamental equity research at SBI Securities, sees the substantial reduction in pledged shares over the past few years as a positive development, as it will ease market concerns around funding. Agrawal anticipates that funds released from the pledged shares could be utilized to reduce debt the company had taken for recent acquisitions like ACC and Ambuja. He believes that with funding requirements addressed and past issues resolved, the Adani Group's need for funds may diminish.
India's Supreme Court ruled in January that the Adani Group won't face further investigations beyond Sebi's current scrutiny, offering relief amid allegations by a US short-seller. Sebi has been probing Adani for tax haven use and stock manipulation since Hindenburg Research's allegations in January 2023. The verdict suggested no heightened regulatory risk for Adani beyond Sebi's ongoing investigation. The court also decided against altering disclosure rules for offshore funds, despite Hindenburg's claims.
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