Hindenburg conflict: Adani Group halts work on Rs 34,900 petrochemical project

The Adani Group has suspended work on a Rs 34,900 petrochemical project at Mundra in Gujarat as it focuses on resources to consolidate operations and address investor concerns following a damning report from a US-based short seller, sources said.

The group’s flagship company, Adani Enterprises Ltd (AEL), had established a wholly owned subsidiary, Mundra Petrochem Ltd, in 2021 to build a greenfield coal-to-PVC plant on the Adani Ports and Special Economic Zone (APSEZ) land in Kutch District to set up in Gujarat.

But after Hindenburg Research’s Jan. 24 report on alleged accounting fraud, stock manipulations and other corporate misconduct chopped about $140 billion off the market value of Gautam Adani’s empire, the Apples-to-Airport group is hoping to hit back at nervous investors and lenders and to calm down by a comeback strategy.

The comeback strategy is based on addressing investors’ concerns about debt by repaying some loans, consolidating operations and deflecting allegations.

The group has denied all of Hindenburg’s allegations. As part of this, projects are re-evaluated based on cash flow and available financing.

And one of the projects the group has decided not to pursue for now is the 1 million tonne-per-year Green PVC project, two sources with knowledge of the matter said.

The group has shot down emails to vendors and suppliers to “stop all activity immediately.”

In the emails seen by PTI, the group has asked them to complete “all work scope activities and fulfillment of all commitments” for Mundra Petrochem Ltd’s Green PVC project. suspended “until further notice”.

This follows the “unforeseen scenario”. Management has “reassessed various projects being implemented at group level in various business areas. Based on future cash flow and finances, some of the projects are being re-evaluated with a view to continuing and revising them on schedule.”

A spokesman for the group, who was approached for comment, said AEL will be assessing the status of growth projects in the basic industry vertical in the coming 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, strong cash flows and our business plan is fully funded. We remain focused on executing our previously outlined strategy to create value for our stakeholders,” the spokesman said.

“AEL will be assessing the status of growth projects in the basic industry vertical over the coming months.”

The plant was to have a polyvinyl chloride (PVC) production capacity of 2,000 KTPA (kilotons per year) and would require 3.1 million tonnes per year (MTPA) of coal, to be imported from Australia, Russia and other countries.

PVC is the world’s third most produced synthetic polymer from plastic. It is widely used – from flooring to the manufacture of sewage pipes and other pipe applications, in the insulation of electric cables, packaging and manufacturing of aprons, etc.

The Adani Group planned the project as PVC demand in India grew by 7 percent year-on-year at around 3.5 MTPA. With domestic PVC production nearly flat at 1.4 million tonnes, India relies on imports to keep up with demand.

The Hindenburg Report had alleged “brazen stock manipulation and accounting fraud” and the use of offshore stamp companies to inflate stock prices. The group has denied all Hindenburg allegations, calling them “malicious,” “baseless” and a “calculated attack on India.”

As part of its comeback strategy, the group has shelved a Rs 7,000 crore purchase of a coal-fired power plant and plans for a stake in electricity trader PTC to cut costs. It has repaid part of the debt and prepaid part of the funds raised by pledging promoter shares to group companies.