Adani Stock slump as 34,000 Cr petchem project suspended

On 20 March 2023, the stocks of Adani Group experienced a steep decline, with Adani Enterprises’ shares dropping by 3.4% to Rs 1813.40. This came amid the reports stating that the group led by Gautam Adani had decided to suspend a petrochemical project worth Rs 34,900 crore in Mundra, Gujarat. The decision came as a direct consequence of the critical Hindenburg report that accused the group of major stock manipulation, accounting fraud, and other corporate governance lapses. 

While the Adani group denied all the allegations leveled at them, they have been taking multiple measures to concentrate on resources to consolidate operations and address investor concerns. Adani Enterprises Ltd (AEL), the group’s flagship, established Mundra Petrochem Ltd, a wholly-owned subsidiary, in 2021 to develop a greenfield coal-to-PVC plant on Adani Ports and Special Economic Zone (APSEZ) land in the Kutch district of Gujarat. The plan was for the facility to be capable of producing 2,000 kilotonnes of poly-vinyl-chloride (PVC) per year, which would require 3.1 million tonnes of coal annually to be imported from various countries including Australia and Russia. This is in response to the increasing demand for PVC in India.

According to sources cited by PTI, the group has instructed its vendors and suppliers via email to halt all activities related to the scope of work and obligations for Mundra Petrochem Ltd’s Green PVC project “until further notice.” The management is currently reassessing various projects being implemented in different business verticals. Furthermore, they have been reported to take this decision due to an unforeseen scenario. Based on the probability of future cash flow and financial standing, some projects are under reconsideration for their continuation and timeline revisions.

While speaking about the current scenario of the company, an AEL spokesperson stated that each of their independent portfolio companies held a very strong balance sheet. He further explained that the company possesses industry-leading project development and execution capabilities, strong corporate governance, secure assets, and strong cash flows with business plans that are fully funded. He assured that the group remains focused on executing all its previously outlined strategies to create value for their stakeholders. After about $140 billion dollars of the group’s market value disappeared since the report was released on January 24, this seems to be part of the Adani group’s plan to try and come out of the crisis it has stumbled upon. In order to allay investor concerns, the group is also trying to repay some of its loans. 

Previously, the group had also withdrawn its bid for a stake in power trader PTC and canceled a coal plant purchase worth Rs 7,000 crore. Additionally, reports suggest that the group is in the process of selling its stake in Ambuja Cement. In an interesting revelation, it was noted that Ambuja Cement is actually owned by Vinod Adani, Gautam Adani’s brother. Following the release of the Hindenburg Report, the group incurred huge losses. They lost $118 billion in value within ten days of the report’s publication. Several investigations have raised additional concerns regarding the group’s operations. In response to the allegations made in the report, the Adani Group released a 400-page rebuttal.