Adani Saga: Reports say Adani has suspended work on Rs 34,900 crore petrochemical project at Mundra

As it focuses on streamlining operations and addressing investor concerns following the Hindenburg short-seller report, the Adani Group has reportedly suspended work on a Rs 349 billion ($4.2 billion) petrochemical project at Mundra in Gujarat, according to a report in the Economic Times on Sunday.

Adani Enterprises Ltd. (AEL), the group's flagship company, had established a wholly-owned subsidiary in 2021 called Mundra Petrochem Ltd. for the purpose of building a greenfield coal-to-PVC facility on Adani Ports and Special Economic Zone (APSEZ) land in Gujarat's Kutch area.

However, following the $140 billion market value loss suffered by Gautam Adani's empire as a result of Hindenburg Research's report on January 24 alleging accounting fraud, stock manipulation, and other corporate governance failings, the apples-to-airport group is attempting to recover and reassure uneasy investors and lenders through a comeback strategy.

As investors are worried about debt, the comeback strategy according to various reports is to pay back some loans, combine operations, and fight off accusations. All of Hindenburg's accusations have been denied by the group. As part of this, projects are being re-evaluated based on cash flow and available funds. Two sources with knowledge of the matter said that the group has decided not to pursue the 1 million tonnes per year Green PVC project for now.

The unit planned to have a 2,000 KTPA (kilo tonne per annum) polyvinyl chloride (PVC) production capability, needing 3.1 million tonnes per annum (MTPA) of coal imported from Australia, Russia, and other nations.

PVC is the third most widely produced synthetic polymer of plastic in the world. It has a wide range of applications, including flooring, sewage pipes, and other pipe applications, electrical wire insulation, packing, and the fabrication of aprons, among others.

Adani Group planned the project because PVC demand in India, which was roughly 3.5 MTPA, was increasing at a pace of 7 per cent year on year. With nearly flat domestic PVC output at 1.4 million tonnes, India is reliant on imports to meet up with demand.

The group is also believed to have sent emails to vendors and suppliers telling them to "stop everything" right away.

In the emails, reviewed by news agency PTI, the Adani 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 "until further notice." This "unexpected situation" is as follows.

It said that the management was "re-evaluating different projects that were being carried out at the group level in different business verticals." Some of the projects are being looked at again to see if they should continue and if the schedule needs to be changed.

When contacted for comment by news website moneycontrol, an Adani group representative stated that AEL will be examining the status of expansion projects in the key industrial verticals in the coming months. "Each of our independent portfolio companies has a very robust balance sheet. We have industry-leading project development and execution expertise, excellent corporate governance, secure assets, and robust cash flows, as well as a fully funded business plan.

"We remain committed to implementing our previously described strategy to produce value for our stakeholders," a spokeswoman was quoted as saying. "AEL will be evaluating the progress of expansion projects in the main industries vertical during the coming months".