Mundra’s petrochemical operations have been suspended as finances are not yet committed

The embattled Adani Group announced on Monday it has put on hold procurement of key equipment and site construction for the Rs 34,900 crore Mundra petrochemical project in Gujarat as the project has yet to commit any funding.

The Group’s flagship company, Adani Enterprises Ltd (AEL), established a wholly owned subsidiary, Mundra Petrochem Ltd, in 2021 to build a greenfield coal-to-PVC plant on the land of Adani Ports and Special Economic Zone (APSEZ) in Kutch District to set up in Gujarat. Asked by the exchanges to comment on a PTI report on Sunday that said the group had halted work on the project, AEL said: “Financial closure of Mundra Petrochemicals Limited (MPL)’s Green PVC project stands at the financial institutions and is active in their consideration.”

Due to recent market developments, management has decided to accelerate technical design and other activities including financial close, it said. “In anticipation of the above, it has been decided to put equipment procurement and site construction activities on hold,” AEL said. “We hope to achieve financial close for the project within the next six months after full procurement and construction activities have commenced at the site. We are committed to completing the project in a timely manner to meet the original timelines.

Following Hindenburg Research’s January 24 report alleging accounting fraud, stock manipulation and other corporate governance misconduct that saw some $140 billion chopped off the market value of Gautam Adani’s empire, the Apples-to-Airport group has launched a comeback Strategy designed to retaliate and calm jitters among investors and lenders by repaying some loans to alleviate concerns about indebtedness and consolidating operations.

The group has denied all of Hindenburg’s allegations. As part of the comeback strategy, projects are re-evaluated based on cash flow and available funding. And one of the projects the group has decided not to pursue for now is the 1 million tonne-per-year green PVC project, two sources with knowledge of the matter said. The group has shot down emails to vendors and suppliers to “stop all activity immediately”.

In the emails seen by PTI, the group said it was “reassessing various projects being implemented at the group level in various business areas. Based on future cash flow and financing, some of the projects are being re-evaluated with a view to proceeding and revising them on schedule.” The plant is expected to have a polyvinyl chloride (PVC) production capacity of 2,000 KTPA (kilotons per year) and 3.1 million tons of coal per year (MTPA) that should be imported from Australia, Russia and other countries.

PVC is the world’s third most produced synthetic polymer from plastic. It finds wide applications – from flooring, sewage pipe manufacturing and other pipe applications to electric wire insulation, packaging and manufacturing of aprons etc. Adani Group planned the project as PVC demand in India is around 3.5 MTPA to the same extent grew by 7 percent year-on-year. With domestic PVC production nearly flat at 1.4 million tonnes, India relies on imports to keep up with demand.

The Hindenburg Report had alleged “brazen stock manipulation and accounting fraud” and the use of offshore stamp companies to inflate stock prices. The group has denied all Hindenburg allegations, calling them “malicious,” “baseless” and a “calculated attack on India.”

As part of its comeback strategy, the group has canceled a Rs 7,000 crore coal-fired power plant purchase and shelved plans for a stake in electricity trader PTC to cut costs. It has repaid part of the debt and prepaid part of the funds raised by pledging promoter shares in group companies.