Adani Enterprises (NSE: ADANIENT) and Adani Ports (NSE: ADANIPORTS) are both up 3% and change on Friday on the back of news about a possible debt raise by the Adani Group. That debt raise is variously put at $800 million to $1 billion. It’s not really all that normal for a share price to rise on the news that the group – not even the specific corporates – is going to be raising more debt finance. But such is the situation at Adani Group that this does indeed make sense.
The point that has to be remembered is that 3 months back Hindenburg made allegations that this is all a house of cards. There are 10 different Adani companies and the allegation is that between them there’s a lot of offshore debt which is used to finance cross shareholdings. Which has the effect, obviously, of boosting the varied group share prices. Of course, all of this is hotly denied but the issue is out there, floating around the market’s hive mind. Just the allegation puts the idea into play as it were.
Adani Enterprises share price from Google
We can therefore see how this debt raise might increase valuations of the equity. Think it through. The allegation is that there’s lots of hidden debt financing those cross shareholdings. Well, if there’s a new debt raise at group level then those international banks are going to be really looking for that hidden debt. Especially since4 they’re primed by the Hindenburg report (and we, ourselves, would bet very good money that some of the potential financiers of the new debt are having long conversations with Hindenburg to check their claims). The next step in the logic is obviously that if the debt can be raised then the hidden debt allegations aren’t true.
So, we can see why the share price rise on the claim that the debt will be raised.
However, we do think it worth pointing out that this is actually a discussion that they will try to raise such debt. We suspect that it will be actually being able to raise such a sum which will be that confirmation – along with the terms upon which it is raised.
