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ADANI BUSINESS REVAMP TO UNLOCK SHAREHOLDER VALUE
THE GROUP INTENDS TO MOVE TOWARDS A STRUCTURE THAT WILL HAVE FOUR INDEPENDENT,
LISTED ENTITIES FOR FOUR MAJOR BUSINESS SEGMENTS
Maulik Pathak, P.R. Sanjai
Published31 Jan 2015, 01:14 AM IST
Chairman Gautam Adani says the scheme of arrangement will drive next level of
value creation, competency, decision making and would be able to accelerate the
business growth. Photo: Abhijit Bhatlekar/Mint
Ahmedabad/Mumbai: Adani Enterprises Ltd, the holding company of the $9.4 billion
(around ₹ 58,000 crore) Adani Group, on Friday outlined plans for a major
business reorganization aimed at unravelling its corporate structure and
unlocking shareholder value.
The group intends to move away from the holding company structure and move
towards one in which it will have four independent, listed entities for its four
major business segments.
The ports business of Adani Enterprises will be folded into Adani Ports and
Special Economic Zone Ltd and all its power assets will be merged with Adani
Power Ltd as part of the restructuring, the company said.
The power transmission business will be run by Adani Transmissions Ltd, which
the group plans to list on BSE and the National Stock Exchange. The listing of
Adani Transmissions, which has over 5,000 circuit km of power lines in western,
northern and central India, is expected to unlock value.
Adani Mining Pvt. Ltd will be folded into Adani Enterprises.
The rearrangement will provide shareholders of Adani Enterprises direct holding
in the operating companies and is “expected to unlock value for the shareholders
of AEL (Adani Enterprises) by eliminating holding company discount”, the company
said.
After the restructuring, Adani Enterprises will be overseeing businesses
including mining, city gas distribution, edible oils, agro commodity trading and
logistics.
“The scheme of arrangement will simplify corporate structure and is a decisive
step towards unlocking the potential value of the Adani Group companies,” said
Gautam Adani, the billionaire chairman of Adani Group.
“The scheme of arrangement will drive next level of value creation, competency,
decision making and would be able to accelerate the business growth. These
developments and positive macro-economic environment re-affirm our commitment
towards securing infrastructure and energy need of the country,” he added.
Investors cheered the announcement. Shares of Adani Enterprises rose 7.79% to ₹
629.50 each on a day BSE’s benchmark Sensex fell 1.68% to 29,182.95 points.
The restructuring will reduce the ₹ 58,000 crore debt on the books of Adani
Enterprises, officials said. Debt will be proportionately transferred to the
units that will be spun off in the restructuring exercise.
The reorganization will be initiated by 1 April, subject to regulatory and other
approvals. Chairman Adani and the promoter group hold a 75% stake in Adani
Enterprises. The remaining is with the public, with institutions holding 21.2%.
Of the 21.2%, foreign institutional investors hold 18.61%.
Experts said Adani Group’s restructuring is largely in line with a corporate
trend in which large corporations are realigning their businesses to unlock
latent shareholder value.
In the past, Larsen and Toubro Ltd, Grasim Industries Ltd and Vedanta Plc have
carried out similar restructuring exercises. Most recently, Max India Ltd said
it will split into three separate units—life insurance; health and allied
businesses; and manufacturing.
A leading consultant who closely tracks the Adani Group said, on condition of
anonymity, that given the group has a presence in multiple businesses, it was
inevitable that it should spin off various units to sharpen its focus.
“From a promoter perspective, this restructuring will help to increase the
valuations of the holding company and respective demerged companies. For
instance, the port business with Adani Enterprises would not fetch a better
valuation compared to a situation when it is with...Adani Ports. The current
move will clean up the structure and derive maximum valuation for all units,” he
said.
For shareholders, the restructuring exercise is accretive in the long term, he
added. “Shareholders will be getting shares of different companies under the
restructuring and they are not saddled with lower valuations.
Post-restructuring, shareholders will be having the flexiblity to sell out or
stay put, based on the performance of the companies,” he said.
The consultant said the Adani Group can sell shares of the mining firm at a
future date, while the transmission company is likely to get a better valuation
considering its business prospects.
On 26 December 2013, Mint reported that the Adani Group is considering
separating its transmission business and spinning it off into a separate entity,
citing unnamed officials.
The plan is for the separate entity to set up transmission lines across the
country; eventually, it may sell shares to public and list on stock exchanges,
Mint had reported.
Separately, Adani Enterprises said on Friday that fiscal third quarter profit
rose more than sixfold on a consolidated basis.
Consolidated net profit increased to ₹ 444 crore in the three months ended 31
December from ₹ 68 crore in the year-ago quarter. Consolidated revenue increased
by 30% to ₹ 17,850 crore from ₹ 13,739 crore in the same period, it said.
“Our overall performance has improved due to higher contribution from coal,
ports and logistics, and power businesses,” Ameet Desai, executive director and
chief financial officer of the Adani Group, said in a statement.
Catch all the Corporate news and Updates on Live Mint. Download The Mint News
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First Published:31 Jan 2015, 01:14 AM IST
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