Adani Group suspends work on Rs 34,900 crore petrochemical project after Hindenburg controversy

Adani Group has suspended work on a Rs 34,900 crore petrochemical project at Mundra in Gujarat as it focuses on resources to consolidate operations and address investor concerns following a damning report by a US-based short seller, sources said. The group’s flagship Adani Enterprises Ltd (AEL) had in 2021 incorporated a wholly-owned subsidiary, Mundra Petrochem Ltd for setting up a greenfield coal-to-PVC plant at Adani Ports and Special Economic Zone (APSEZ) land in the Kutch district of Gujarat. But after Hindenburg Research’s January 24 report alleging accounting fraud, stock manipulations and other corporate governance lapses chopped off about $140 billion from the market value of Gautam Adani’s empire, the apples-to-airport group is hoping to claw back and calm jittery investors and lenders through a comeback strategy. The comeback strategy is based on addressing investor concerns around debt by repaying some loans, consolidating operations, and fighting off allegations. The group has denied all allegations levelled by Hindenburg. As part of this, projects are being re-evaluated based on cash flow and finance available and of the projects, the group has decided not to pursue for the time being is the 1 million tonnes per annum Green PVC project. 

The group has shot off mails to vendors and suppliers to “suspend all activities” on an immediate basis.In the mails, seen by PTI, the group has asked them to “suspend all activities of the scope of work and performance of all obligations” for Mundra Petrochem Ltd’s Green PVC project “till further notice. This is the following “unforeseen scenario”. The management, it said, was “re-evaluating various project/s being implemented at group level in different business verticals. Based on future cash flow and finance, some of the project/s are being re-evaluated for its continuation and revision in the timeline. ”The unit was to have a poly-vinyl-chloride (PVC) production capacity of 2,000 KTPA (kilo tonne per annum) requiring 3.1 million tonnes per annum (MTPA) of coal that was to be imported from Australia, Russia and other countries. PVC is the world’s third-most widely produced synthetic polymer of plastic. It finds wide applications – from flooring to making sewage pipes and other pipe applications, in insulation on electrical wires, packaging and manufacture of aprons etc. Adani Group had planned the project as PVC demand in India at around 3.5 MTPA was growing at the rate of 7 per cent year-on-year. With near-stagnant domestic production of PVC at 1.4 million tonnes, India is dependent on imports to keep pace with the demand. The Hindenburg report had alleged “brazen stock manipulation and accounting fraud” and the use of offshore shell companies to inflate stock prices. The group has denied all Hindenburg allegations, calling them “malicious”, “baseless” and a “calculated attack on India”.