Hindenburg Effect Still On? Adani Group Stops Work On Its Rs 35,000 Crore Petrochemicals Project

This week will mark the completion of two months since Hindenburg research¡¯s report came out in January and rattled the Adani group.

And it seems that despite some recovery shown by the company¡¯s shares in recent weeks, the Hindenburg effect is still impacting the conglomerate.

Hindenburg Effect Still On?

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Gautam Adani is suspending activities at the Rs 34,900 crore petrochemicals project in Mundra, Gujarat, as the billionaire¡¯s business empire slows down spending following a short-seller attack, as per PTI.

Shares of Adani Enterprises and Adani Wilmar were again down nearly 3.5% today after this news, Adani Ports was down nearly 2%, Adani Total Gas was down 5%.

In 2019, Adani announced plans to foray into India¡¯s petrochemicals sector with a factory in his home state of Gujarat. Two years later, he incorporated Mundra Petrochem and Adani Petrochemicals to set up feedstock (coal, petcoke, limestone, LPG, LNG, LPG, green fuels, etc) -based refineries and petrochemicals complexes.

Both Mundra Petrochem and Adani Petrochemicals are 100% subsidiaries of his empire¡¯s flagship Adani Enterprises.

Also Read: How Rajiv Jain Made Rs 3,100 Crore Profit On Adani Stocks In 2 Days

"Suspend All Activities For Mundra Petrochem"

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PTI reported that Adani has decided to freeze the proposed one-million-tonne green PVC project due to unforeseen circumstances. Adani, according to mails seen by the news agency, has asked vendors and suppliers to ¡°suspend all activities and performance of all obligations¡± for Mundra Petrochem¡¯s green PVC project ¡°till further notice¡±. The report further said that the conglomerate¡¯s management was re-evaluating various projects based on its future cash flow and finance.

This is the latest project that the Adani Group has re-evaluated since Hindenburg¡¯s attack. Earlier, it had halted a Rs 7,017-crore deal to acquire DB Power and withdrew a Rs 20,000-crore further public offering of Adani Enterprises.

In January, New York-based short-seller Hindenburg Research had accused the Indian conglomerate of using offshore shell companies to inflate its listed companies¡¯ stock prices as well as of accounting fraud in its report. It also flagged concerns about the Adani Group¡¯s Rs 2.3-lakh-crore debt in the report. Adani has denied the allegations, as per PTI.

"Adani Evaluating The Status Of Growth"

When contacted for comments on the suspension of activities at the Green PVC project, an Adani Group spokesperson said Adani Enterprises will be ¡°evaluating the status of growth projects in primary industry vertical over the coming months¡±. He didn¡¯t elaborate which are these growth projects and in which industries. He added, ¡°The balance sheet of each of our independent portfolio companies is very strong. We have industry-leading project development and execution capabilities, strong corporate governance, secure assets, strong cash flows, and our business plan is fully funded. We remain focused on executing our previously outlined strategy to create value for our stakeholders.¡±

PVC is the world¡¯s third-most widely produced synthetic polymer of plastic, as per the report. It finds wide applications ¡ª from flooring to making sewage pipes and other pipe applications, in insulation on electrical wires, packaging and manufacture of aprons, etc. Adani Enterprises had planned the project as PVC demand in India at 3.5 MTPA was growing at the rate of 7% 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.

Also Read: Meet Nathan Anderson, The Man Behind Hindenburg Report

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