Adani refinances $3.7 bn mortgage in Ambuja, ACC deal

Two folks with direct data of the matter confirmed this, including the transfer is not going to solely assist Adani Group repay your entire mortgage taken for buying Ambuja Cements Ltd and ACC Ltd, however may additionally scale back the group’s value of capital. The consortium consists of Deutsche Bank AG, Standard Chartered Bank plc, Barclays plc, Citibank NA, MUFG Bank Ltd, Sumitomo Mitsui Banking Corp and different lenders, the 2 folks stated.

The refinance deal could improve the group’s credit standing and strengthen its capability to accumulate different cement companies, in sync with the group’s ambition to beat Ultratech Cement Ltd to grow to be the nation’s largest cement maker doubling its capability to 140 mtpa by 2027.

This is a key a part of the revived capex plan at Adani Group which, earlier this yr, suffered a $150 billion wealth wipe-out at one level following a adverse report by US-based short-seller Hindenburg Research on 24 January.

On 13 September, Bloomberg reported that the Adani Group is in talks with banks to refinance debt taken on to fund its buy of Ambuja Cements Ltd, with lenders divided into three classes in what could possibly be one in every of Asia’s largest syndicated mortgage offers of the yr.

In August 2022, Adani Group acquired Ambuja Cements and ACC for $6.5 billion, of which $2 billion was financed through fairness.

A $4.5 billion debt obligation arose out of the bridge mortgage that was secured by the Adani Group from a consortium of 14 banks to accumulate the 2 cement firms.

“Of this, at the least $700 million has already been repaid by the promoters,” one of many two folks stated on situation of anonymity.

According to the 2 folks, other than the 14 current banks, at the least six new international banks have joined to type the 20-member consortium.

Spokespersons from Deutsche Bank, Standard Chartered Bank, Citibank NA and Barclays declined to touch upon the refinance deal.

“Since the speed of curiosity is decrease, the newest refinance deal will scale back the group’s value of capital,” said the first person. “The bridge loan for the acquisition was availed for a tenure of 18-24 months at an interest rate of up to 6.5%. The latest $3.7 billion refinance deal, which is meant to repay the bridge loan, will be availed at a lower interest rate of 6.24%,” stated the primary individual, including the decrease curiosity value is not going to solely improve the credit standing but in addition save round ₹2,500 crore for Adani’s cement companies yearly.

“The tenure of the refinance can be 36 months,” said the first person.

Alongside, Ambuja Cements and ACC together generate around $1 billion in cash every year.

“These two factors together will help Adani Group in its mega-inorganic growth plan,” stated the primary individual.

In August, Adani Group-owned Ambuja Cements acquired a 56.74% stake in Gujarat-based cement-maker Sanghi Industries Ltd, valuing the latter at ₹5,000 crore. “After the refinance deal, Adani Group could purchase one other mid-size cement-making agency within the subsequent six-nine months which is able to enhance the present capability of its cements enterprise to shut to 100mtpa,” said the first person.

On 4 October, a report by The Hindu Business Line said Adani Cement may join the race along with Parth Jindal-led JSW Cement to acquire Heidelberg Cement India, which has a capacity of 14 mtpa.

JP Morgan India Pvt. Ltd on 2 August said in a report that Adani has estimated a 17% sales volume CAGR in the 2023-28 period.

“While the vision and growth targets are impressive, the reduction in cash balances at ACC-Ambuja Cements, and the acquisition debt at the parent holding company, means that how ACC-Ambuja Cements would fund the aggressive capex needs to be seen,” the report stated.

Since the newest refinance deal will convey a big a part of Adani group’s total debt underneath a decrease price regime, the group’s total credit-worthiness and the leverage ratio could enhance, stated the second individual, including that at the least 40% of the cement manufacturing course of by Ambuja Cements and ACC can be ESG compliant and non-clinker dependent, which can additional improve the 2 cement companies’ credit standing. “….the big order placement (by Ambuja Cements) is a optimistic signal and highlights the seriousness of Ambuja Cement’s capability plans,” said JP Morgan.

As of 31 March, 2023, Adani Group’s gross debt stood at and cash position in the book was at over ₹60,000 crore.

An MUFG spokesperson declined to comment.

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Updated: 11 Oct 2023, 10:49 PM IST