Adani group pledged shares: GQG deal with 4 Adani firms to ease fund raising concerns, says Kotak

Adani group's completion of one of its largest deals at $1.9 billion through 2.5-4.1 per cent stake sale across its four listed entities to GQG Partners should assuage concerns about the group’s ability to raise funding for the repayment of loans against its listed company shares -- its stated target, said Kotak Institutional Equities. The domestic brokerage said Adani group can potentially raise another $8 billion (at deal price) while maintaining majority control.

GQG Partners on Thursday via block deals bought 38,701,168 Adani Enterprises shares at Rs 1,410.86 apiece for Rs 5,460 crore. It purchased 88,600,000 Adani Ports shares at Rs 596.20 apiece for Rs 5,282 crore. In Adani Transmission, it bought 28,400,000 shares at Rs 668.40, totalling Rs 1,898 crore. Besides, it bought 55,600,000 shares of Adani Green Energy at Rs 504.60, valuing Rs 2,806 crore.

Based on December-end market capitalisation of the group’s listed entities with pledged shares, the value of the aggregate pledged shares was $$9 billion, said Kotak Institutional Equities, adding that the underlying loan would be lower based on asset cover.

"This includes the component linked to the $6.5 billion acquisition amount for the stake acquired in cement companies by the group. The recent repayment of such loans ($1.1 billion), coupled with the current amount raised through stake sale ($1.9 billion), should enable the group to repay a major share of its loans against shares, a stated target of the group," it said.

Adani group had $9 billion of aggregate value of shares pledged of listed entities and has repaid US$1.1 bn of the underlying debt since December 2022.

Adani Ports a ‘Buy’

Kotak Institutional Equities said it has retained its BUY rating for Adani Ports, suggesting a fair value of Rs 810. Adani Ports, it said, is a strong play on India’s port sector, having attractive characteristics—pricing power, prospects of privatisation and "strong right to win by providing an end-to-end logistics offering."

The Adani Ports stock is trading at 11.5 times FY2024 EV/Ebitda against 10-16 times one-year forward trading range. Its estimates bake in sub-7 per cent volume CAGR over FY2022-25E in existing assets and a 13 per cent CAGR in overall volumes.

"Our DCF-implied 12.5 times EV/Ebitda factors in 14 per cent cost of equity. We note that the ports business is otherwise an attractive one with pricing power, well-demonstrated by a sharp 10 per cent increase in realisations taken by Adani Ports in FY2023," it said.

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