Mumbai: The Adani group on Friday said it has clinched a $3.5 billion debt refinance deal from a consortium including at least 10 foreign lenders to repay the debts that were taken last year by the group’s promoters to fund the $6.6 billion acquisition of Ambuja Cements Ltd and ACC Ltd.
The refinancing deal, whose terms are more favourable than the original acquisition loan, has a maturity of up to three years.
An Adani group special purpose vehicle called Endeavour Trade and Investment Ltd will avail the refinance amount.
According to the group, the refinance terms may save it around $300 million compared with the costs involved in the original loan.
On 11 October, Mint reported that the Adani group had entered into a $3.7 billion refinance agreement with a consortium of banks, the largest such deal in the cement industry.
The 10 global banks in the refinancing deal include DBS Bank, First Abu Dhabi Bank, Mizuho Bank, and MUFG Bank as mandated lead arrangers, bookrunners and underwriters. In addition, Barclays Bank Plc, BNP Paribas, Deutsche Bank AG, ING Bank, Sumitomo Mitsui Banking Corp., and Standard Chartered Bank have come in as joint lenders.
The refinance deal, apart from saving the group on costs, may enhance its credit rating and strengthen its ability for brownfield expansion. This is in line with its aspiration to beat its only bigger cement rival Ultratech Cement Ltd by doubling capacity from 70 million tonnes per annum (mtpa) now to 140 mtpa by 2027. The latest refinance is part of the group’s bigger strategy to deleverage Adani’s cement business in a phased manner. The cement business’s leverage ratio (net debt to Ebitda ratio) is now less than two times, the company said in a release.
In August 2022, Adani group acquired Ambuja Cements and ACC for over $6.5 billion, of which $2 billion was financed via equity and the rest through debt.
A $4.5 billion debt obligation arose out of the bridge loan that was secured by the Adani group from a consortium of 14 banks to acquire the two cement companies.
Currently, Ambuja Cements and ACC have a combined installed production capacity of 67 mtpa, which will touch 100 mtpa by 2025 with the announced acquisition of Sanghi Cement.
Adani group on Friday said the business efficiency of ACC and Ambuja has improved. The group’s cement business has witnessed an improvement in the operating income per tonne from ₹340 in the quarter ended September 2022 (immediately after the acquisition) to ₹1,253 as of the June quarter of this fiscal.
Cyril Amarchand Mangaldas, Latham and Watkins acted as Adani group’s counsel for the deal, while Allen & Overy LLP, Talwar Thakore and Associates acted as legal counsels to the lenders.
In August, Ambuja Cements acquired a 56.74% stake in Gujarat-based cement maker Sanghi Industries Ltd, valuing the latter at ₹5,000 crore. At a higher level, the latest refinance deal may relieve the group’s debt woes.
As of 31 March, Adani group’s gross debt stood at ₹2.27 trillion, while the cash position in the group’s book was over ₹60,000 crore.
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