One of the Adani promoter group entities - Ardour Investment Holding - has completed the conversion of warrants into equity towards renewable energy flagship Adani Green Energy (AGEL), which market sources are interpreting as a sign of 'commitment and confidence' in the company by the Adani family.
The warrants were issued in January 2024 to the promoter group at a price of Rs 1,480.75 per unit for a 25 percent upfront payment, and now, the remaining amount was paid upon conversion on July 18 at a price of Rs 1,110.56 per unit, after the board’s approval.
The promoters had reduced stake in AGEL to around 56 percent from 60 percent after the now-defunct market research firm Hindenburg's report on the Adani Group in January 2023. The reduction in promoters' holding in AGEL was due to stake sales to private equity and sovereign wealth funds GQG Partners and Qatar Investment Authority (QIA), respectively.
The fresh infusion by promoter entity takes its stake in AGEL to 62.5 percent, at a time when the group has lined up $100 billion in capital expenditure over the next five years. In FY26 itself, AGEL plans to add 5 gigawatt (GW) in renewable energy capacity, which will entail a capital expenditure of around Rs 31,000 crore.
Currently, AGEL has around 15.8 GW in installed capacity, which is expected to reach 19 GW by the end of the fiscal. Sources told Moneycontrol the company has signed power purchase agreements (PPAs) of an additional 16 GW capacity.
Much of AGEL's capital expenditure plans are related to its targetted capacity of 50 GW by the end of the decade, more than half of which will be located at Gujarat’s Khavda Solar Park, largest of its kind in the world, less than 20 kilometres from the international border with Pakistan. At Khavda, AGEL is planning to install a capacity of 30 GW - as largely solar power - which will also include wind energy assets. AGEL is also planning to expand its capacities or plan new ones in Rajasthan and Andhra Pradesh.
AGEL is also counting on group synergies to reduce overheads and increase margins, and has been focusing on procuring solar panels, wind turbines and energy storage solutions from group firms such as Adani New Industries, housed under group flagship and incubator Adani Enterprises.
Of the Rs 9,350 crore received by the company from the promoters, AGEL plans to use around Rs 6,200 crore as growth capital and other corporate purposes. It plans to spend Rs 3,116 crore to retire debt, and aims to ‘maintain strict credit discipline’ while continuing to grow, while it generates cash flow.
In FY25, the company's net debt-to-EBITDA ratio reduced to 6.05x to 6.57x earlier, with AGEL planning to further reduce the ratio to 4x by FY28. According to market observers, the FY28 net debt-to-EBITDA ratio target, if realised, will make AGEL one of the lowest-levered companies globally in an industry that requires high degrees of capital expenditure.
While reporting elevated levels of debt, Adani Group firms have expressed comfort due to increased cash flows resulting in higher levels of EBITDA. For FY25, all core listed Adani firms - energy, infrastructure, cement - reported a total EBITDA of nearly Rs 90,000 crore, higher by 8 percent on-year.
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