Adani Ports Plans Bond Buyback to Demonstrate Power and Restore Investor Confidence

Adani Ports & Special Economic Zone Ltd has announced its plan to buy back up to $130 million in bonds starting in July 2024 and continuing for the next four quarters to demonstrate its healthy liquidity position. This move has caused Adani Group bonds to rise, marking the first debt buyback since the company was targeted by a short seller in January.

Adani Ports’ commitment to repaying debt demonstrates its cautious approach to capital spending, which is set at 40-45 billion rupees ($548 million) for this financial year. According to BI specialist Denise Wong, this commitment could help reduce the company’s renegotiating worries ahead of significant developments in 2024. However, it could also hinder the company’s ability to boost earnings growth through expansion and mergers and acquisitions.

Prices for 10 out of 15 Adani Group company notes denominated in US dollars, which are tracked by Bloomberg, have increased. This was largely due to a 0.69% increase in the value of Adani Ports’ senior obligation, which matures in July 2024 and carries an interest rate of 3.375%. This represents the largest increase in a month.

The buyback of these notes is an attempt by the Adani Group to restore investor confidence, following the negative impact of a Hindenburg Exploration report on its bonds and shares. Adani Ports’ commitment to repaying its debts in a timely manner should enable it to maintain its capital spending target of between 40 and 45 billion rupees ($548 million) for the current financial year, according to Bloomberg Intelligence.

There are still concerns about the approximately $6 billion worth of Adani securities facing the risk of being downgraded to high-yield debt or the “fallen angel risk.” Nonetheless, Adani Ports may be less under pressure than the group’s other companies due to its strong cash flows.