Adani Group suspends petrochemical project after Hindenburg report

Adani Group suspends petrochemical project after Hindenburg report

Adani Group suspended work on a Rs 34,900 crore petrochemical project in Gujarat's Mundra after being hit by Hindenburg Research's stinging report. In 2021, Gautam Adani-led group's flagship firm, Adani Enterprises Ltd AEL, incorporated a wholly-owned subsidiary - Mundra Petrochem Ltd - for setting up a greenfield coal-to-PVC plant in Adani Ports and Special Economic Zone APSEZ land in Kutch district of Gujarat.

The report states that the group has decided not to pursue the 1 million tonnes per annum Green PVC project for the time being. The news agency PTI reported on Sunday that the group has shot off emails to vendors and suppliers to'suspend all activities' on an immediate basis.

In its January 24 report, Hindenburg stated that key listed Adani companies had taken substantial debt, putting the whole group on precarious financial footing. The group tried to reduce its debts and win back the confidence of investors after the report triggered a crash in Adani stocks. As part of the effort to reduce debts, the project was suspended.

The management is re-evaluating various projects that are being implemented at the group level in different business verticals, according to the group. Based on future cashflow and finance, some of the project s are being re-evaluated for its continuation and revision in timeline, it added.

A group spokeswoman told the news agency that AEL will be evaluating the status of growth projects in the primary industry verticals over the next few months. The balance sheet of each of our independent portfolio companies is very strong. We have industry-leading project development and execution capabilities, strong corporate governance, secure assets and strong cashflows, and our business plan is fully funded. The spokesperson said that we are focused on executing our strategy to create value for our stakeholders. AEL will be looking at the status of growth projects in the primary industry vertical over the coming months, as Adani's unit would have a poly-vinyl chloride PVC production capacity of 2,000 KTPA kilo tonne per annum requiring 3.1 million tons of coal per annum MTPA from Australia, Russia, and other countries, according to the news agency.

PVC, the world's third-most widely produced synthetic polymer of plastic, is used in wide applications - from flooring to making sewage pipes and other pipe applications, in insulation on electrical wires, packaging and manufacture of aprons, etc. The Adani Group had planned the project because PVC demand in India was at around 3.5 MTPA and growing at a rate of 7 per cent year-on-year.

After the scathing report by US short-seller Hindenburg accused the group of indulging in brazen stock manipulation and accounting fraud, the group denied all of the allegations, but the damage was already done as its stocks fell nearly 80 per cent before making a recovery.

The group is cancelling some projects and prepaying some debts to restore the confidence of the investors. Recently, the troubled group cancelled a Rs 7,000 crore coal plant purchase and shelved plans to bid for a stake in power trader PTC. The group announced last week that it had completed the full prepayment of margin-linked share-backed financing, amounting to $2.15 billion, ahead of the commited timeline of March 31, 2023. The promoters had also prepaid the $500 million facility taken to buy Ambuja, according to the group.