We have created businesses that are significant cash flow generators: Jugeshinder Singh

"We have designed the issue in the manner consistent with what works best for mom and pop retail investors including HNIs," says Jugeshinder Singh, Group CFO, Adani Enterprises.


Given the fact that this is going to be the largest ever follow on public offering so far, what gives you the confidence that this is going to be a big success? There is a 10% discount also that you provided as far as the current market price goes but it is very-very large issue that we are seeing the largest so far as a follow-on public offer why are you so confident?
I think fundamentally the rights issue does not give one objective which is expansion of the share register. So when we are doing this issue which is a follow-on public offer, it brings in new shareholders and that is one key fundamental objective that is to expand the share register and give the participation to the retail investor.

And in this issue, the retail investors would be 35, HNI would be another 15%. So that is actually 50% of the issue size kept for retail/HNI investors. Currently in our share register we do not have 50% retail, so if we do our rights issue, we will be limited to that 1% so that completely defeats the purpose.

The best way to expand the share register is to do this and it allows us to expand share register, bring in the new investors and in that new investor the majority will be retail/HNI.

So fundamentally that is what we want to achieve and that is why we structure the issue. We have designed the issue in the manner consistent with what works best for mom and pop retail investors including HNIs.

You will be deploying most of the capex towards green energy business, airport, and infra business as well. Will you also be looking at reducing the proceeds of the debt from the FPO and is there any timeline prepared for listing these companies?
In the past we have also seen Adani Group doing the same to create investor wealth. That is actually the fundamental business of Adani Enterprise. It behaves as an incubator, it has been that way for the past 20-25 years. So our objective is once each individual business is sufficiently robust that it can meet its own investment planning through its own capital management that is an appropriate time to demerge them and hand them over to the investors of AEA which we have done in the past in relation to if you look at Adani Ports, Adani Power, Adani Transmission, Adani Green Energy, Adani Total Gas.

I mean those four-five businesses themselves are nearly $200 billion worth. More importantly sometimes these things get missed in understanding of people and there is too much desktop analysis that goes on.

Not only have we created businesses which are worth billions of dollars in value but a bigger and more important element for us is that these businesses are also like unicorn in cash flows.

Adani Ports is over one billion of EBITDA close to two billion. Adani Green almost is touching a billion of run rate EBITDA, Adani Transmission almost is nearly touching one billion EBITDA and Adani Total Gas on now at 300 million odd EBITDA business and Adani Power has over a billion dollar of EBITDA.

So what we have done is not only have we created high value businesses but we have created businesses that are significant cash flow generators and massively cash flow positive businesses and this in the incubation world or unicorn world, this is one of the missing thing that we do the business to produce free cash flow.

All of our businesses that have come up produce free cash flow and the same we expect going forward because our core investment philosophy remains the same. We invest in the core of infrastructure which is rather transport logistics or energy and utilities so even the businesses we are incubating today if you look at airports, roads, data centre and the hydrogen business at the current stage they are also cash flow positive so that is one part of where Adani Enterprises focuses on.

So any timelines that you can give us regarding the listings, anything that we can expect say in the next one year?
No, nothing in the next one year. We have done Wilmar IPO which is independent listed last year. But our plan would be that these major businesses will be ready somewhere between 2025 and 2028 which I have mentioned few weeks back and we have publicly said last year as well and that timeline stays.

And does this fundraise completely suffice your capex needs for FY24 or would you need more?
No, this is the equity element of the capex. So yes, it actually suffices. The equity planning is done three-years rolling. So, it suffices actually the equity requirements that are required by the businesses over the next three-year period and each three-year we roll our equity planning in the manner and that is how we design that from an equity perspective, the capital requirement plan of the businesses.

Now around Rs 4000 crores will be used for your debt repayment and your gross debt will come down by about 10%. Going forward where do you see your debt figure?
With due respect I think in incubation business if this is one of the missing pieces and we wish that India had incubator index or India had utility index or somebody could explain these things but nevertheless so it becomes our job.

Now as an incubating business what we are doing is when you say the debt repayment, we are setting up the capital structure of the incubating business. So, when we repay that incubating business for example, roads or airports we will pay its debt back and have its balance sheet set up appropriately on a risk basis which is correct for that business.
Now, if in the future we incubate a new business initially Adani Enterprise will give a shareholder loan to that business and set it up and then when we do the risk adjusted investment analysis of that business we will determine how much equity support from a credit point of view, from its growth point of view to meet its own requirement then that will determine how much equity then we inject in that business.

So, this exact process we are going through now which we done in the past also for ports, for transmission, for green business as well.

So, it is a process of recycling your capital to continue to incubate new businesses as distinct from changing the fundamental nature of capital so that is not altering in relation to this issue because the individual business’ capital structure is not dependent on what AEL does as incubator, when they want to borrow they will borrow more, if they do not need to borrow that will be determined by those individual businesses not AEL.