Bloomberg News

Billionaire Adani May Sell Coal Asset Stake in London IPO

June 01, 2011

(Updates with share close in seventh paragraph.)

June 1 (Bloomberg) -- Adani Enterprises Ltd., India’s biggest coal importer, may sell shares in a unit that holds mining rights in the Asia-Pacific region to international investors and use the proceeds to add energy assets.

The Ahmedabad, India-based company may sell a stake of as much as 20 percent in Adani Mining Ltd. in an initial public offering in London within the next two years, said Gautam Adani, billionaire chairman of Adani Enterprises.

The Adani group wants to tap overseas investors keen to benefit from rising power demand in India, the world’s fastest- growing major economy after China. Adani is buying coal mines to help feed the company’s $20 billion push to increase power generating capacity 10-fold in the South Asian nation. The company has mining rights in Australia, Indonesia and India.

An overseas listing will improve the company’s “capability to raise funds for further fueling acquisitions,” Adani, 48, said in an interview in Mumbai yesterday. “India will remain energy hungry for the next 50 years.”

Adani declined to comment on the amount the company plans to raise. Yanzhou Coal Mining Co., China’s fourth-largest producer, may raise more than A$1 billion in an initial share sale for at least a third of its Australian unit by the end of the year, Ian McAleese, investor relations manager of Brisbane- based Yancoal Australia Ltd., said in an e-mailed response on May 24.

‘Favorite’ Stock

“There in an appetite to invest in resource companies but that appetite may not be there if we get more bad economic news from Europe or North America or a slowdown in China,” David Brennan, an analyst at Daiwa Capital Markets in Melbourne, said by phone today. “I would say sooner than later would be better.”

Adani Enterprises fell 0.4 percent to 635.9 rupees at the 3:30 p.m. close in Mumbai. The shares have gained 19 percent in the past year compared with a 12.3 percent increase in the benchmark Sensitive Index.

Adani Enterprises is among Morgan Stanley’s “favorite” stocks that can potentially double in three years, analysts led by India Managing Director Ridham Desai said in a report yesterday.

Adani, who dropped out from school after finishing his 10th grade, is India’s sixth-richest man with $10 billion of assets, according to Forbes magazine.

Blackouts

The Adani group’s generating unit Adani Power Ltd. expects to produce 20,000 megawatts of electricity by 2020, up from 2,000 megawatts. Prime Minister Manmohan Singh aims to add 120,000 megawatts of power by 2017 to reduce blackouts and plug a deficit of 10.5 percent during peak hours that threatens to scuttle economic development.

The group is also planning to sell bonds overseas to help fund its investments, Adani said. Adani Enterprises plans to invest $4 billion to boost output at its Australian mine to 60 million metric tons by 2019 after production starts in 2014, he said. Coal reserves at the mine purchased from Linc Energy Ltd. may be at around 10 billion tons, said Adani.

The company purchased the asset from Linc Energy for A$3 billion, including royalty payments over 20 years.

Coal Transport

“The company will need to make a lot of investments to integrate mining and logistics” to produce low-cost electricity in India, said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. Still, buying coal assets is a good strategy “in the long term,” he said.

To ship the coal from its Australian mine, Adani Enterprises’ port unit today paid A$1.83 billion ($2 billion) to operate the Abbot Point terminal in the nation’s Queensland state.

The company in October said it has won rights to mine as much as 110 million tons of coal in India. Adani Mining has identified 140 million tons of coal mine reserves in East Kalimantan in Indonesia, according to its website. The company is also exploring more options in Australia and South Africa, according to the website.

Adani’s group is targeting to produce 200 million tons of coal a year by 2020, while its port business may process 200 million tons of cargo in the same period.

Oil & Gas

The company is also looking to acquire oil and gas assets overseas, Adani said. Adani Welspun Exploration Ltd., a venture with Welspun Gujarat Stahl Rohren Ltd., has found energy in India, Adani said without giving details.

To meet its targets, the Adani group expects to almost triple the number of employees to 25,000 by 2020, which will include 5,000 workers in Australia by 2014, Adani, who started his business in 1988, said.

Demand for coal from power and steel producers has spurred companies to seek energy assets worldwide, with deals worth $43 billion announced in the past year, according to data compiled by Bloomberg.

India competes with China to secure supplies of coal, which is used for more than half the South Asian nation’s electricity generation capacity. India’s coal deficit may triple over the next five to seven years, a local unit of Moody’s Investors Service said in a report in February.

--Editors: Arijit Ghosh, Ryan Woo

To contact the reporters on this story: George Smith Alexander in Mumbai at galexander11@bloomberg.net; Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net


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