Billionaire Gautam Adani’s company committed $13 billion in shares in two Indian cement firms just days after completing the acquisition of Holcim Ltd., demonstrating the world’s second-richest person’s need for finance as his ports-to-power conglomerate expands swiftly.
According to separate disclosures made to Indian stock exchanges by Deutsche Bank AG’s Hong Kong branch, stakes in two of those businesses—approximately 57% of ACC Ltd. and 63% of Ambuja Cements Ltd.—have been encumbered “for the benefit of certain lenders and other finance parties.”.
Because the deal is a non-disposal commitment, the shares cannot be sold until the debt is repaid. The vow comes as the tycoon’s ambitious dealmaking in a variety of new sectors, ranging from green energy to media, raises concerns about the Adani group’s high level of debt. Even though the company has taken steps to reduce some of its listed companies’ commitments, some of its units still have high leverage ratios that make them do better than their peers around the world.
Adani’s debut into the cement market was highlighted by the purchase of Holcim earlier this year, and the tycoon wants to treble his company’s annual capacity by 2027 as a result of the agreement, which has made his conglomerate India’s second-largest manufacturer of the construction material. Jefferies Financial Group Inc. says that the acquisitions give Adani Group access to cash from the two listed companies worth about 110 billion rupees ($1.4 billion).
With its new owners’ 200 billion rupee financial infusion, the combined business has enough of a “war chest to scale up further expansions, organically or inorganically,” Prateek Kumar, a Jefferies analyst, wrote in a report on Monday. The encumbered holdings in ACC and Ambuja were valued at $13 billion as of Monday’s closure. The agreements under which shares have been pledged include Endeavour Trade and Investment Ltd. and Xcent Trade and Investment Ltd., both of which are affiliated with the Adani Group.
Endeavour Trade gained an antitrust license from India’s antitrust agency in August to acquire a share in Holderind Investments Ltd., a Mauritius-based holding company of Holcim’s India unit. Adani’s entry into cement, combined with recent commodity price decreases, has resulted in a rise in cement equities in India. Since the sale of Holcim was made public in May, shares of ACC and Ambuja have gone up by 29% and 60%, respectively.
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