MUMBAI – Indian tycoon Gautam Adani’s plan to raise at least US$5 billion (S$6.9 billion) in equity aims to shut down two of the most frequent criticisms levelled against his swelling empire: high debt ratios and a limited investor base.

After four years of eyebrow-raising gains – some Adani Group shares surged more than 2,000 per cent – Asia’s richest person is embarking on a fund-raising campaign that will likely include a local share sale as well as buy-in from large investment funds in the Middle East and Canada.

An equity injection of this size is expected to help the conglomerate deleverage and Bloomberg Intelligence sees a successful equity raise across the group supporting the companies’ dollar bonds.

The billionaire is seeking legitimacy in the face of questions about his group’s breakneck expansion – from a traditional port operator to a sprawling empire with assets including media, cement and green energy – which critics say has boosted leverage and financial complexity.

With this fund-raising, Mr Adani can, in one fell swoop, improve debt ratios, broaden his investor base, improve stock liquidity and trigger wider analyst coverage for a conglomerate that is surprisingly under-covered despite the outsized stock gains.

“The fund-raising exercise by Adani Group is putting the naysayers in place,” said Mr Sanjiv Bhasin, director at brokerage IIFL Securities. “He is embarking on a new fund drive that will boost the credibility of the group and allay the fears of investors.”

Yet questions remain over what kind of investors Mr Adani will be able to attract, and whether they can be persuaded to buy in at the astronomical valuations his units trade at. The Adani Group declined to comment.

‘Lots of questions’

Adani executives are courting global sovereign and pension funds, including Mubadala Investment, Abu Dhabi Investment Authority and the Canada Pension Plan Investment Board. The total fund-raising size could be as high as US$10 billion, according to people familiar with Mr Adani’s thinking.

The equity plans come as the 60-year-old seeks to reinvent himself on the global stage. Despite adding more billions to his wealth than any other tycoon this year, Mr Adani has struggled to shed the perception that his meteoric rise has been fuelled by support from Indian Prime Minister Narendra Modi. Research firm CreditSights in September had put the spotlight on the group’s “elevated” leverage and lawmakers have sought an investigation into some of the group’s investors.

“There are a lot of questions about opacity, about lack of disclosures, valuations, obviously. But it is trickier because the businesses will grow if India grows,” said Mr Vikas Pershad, a fund manager at M&G Investments. “They are at the right place at the right time.”

The flagship company, Adani Enterprises, is trading at a valuation of more than 160 times its one-year forward earnings. By comparison, Reliance Industries – India’s largest firm by market value – is at about 21 times, according to data compiled by Bloomberg.

Adani Enterprises was added to India’s benchmark Nifty 50 index in September and its equity sale is likely to draw in a number of passive funds. But merely adding more strategic or passive investors is unlikely to increase liquidity, according to Quaero Capital portfolio manager Alice Wang, who estimated the company’s free float at about 10 per cent, far lower than the reported 27 per cent.

“It will be a pity if it is the same strategic holders participating,” Ms Wang said. “But as this might solve their problems without putting pressure on their share price, it is a real fait accompli – great for the banks, jury still out for the equity holders.”

A successful outcome for the tycoon would be to pull off something similar to fellow Indian billionaire Mukesh Ambani, who raised more than US$27 billion in 2020 by selling stakes in units of Reliance Industries to global investors including Meta Platforms and Google parent Alphabet. BLOOMBERG