Adani Enterprises’ coal trading margins double

Indian infrastructure tycoon Gautam Adani’s flagship company withstood a collapse in coal trading revenues to post a rise in quarterly operating profits, in results published Thursday.

While higher taxes and other issues pushed down Adani Enterprises’ net profits, reduced inventories and unusually high margins in coal trading helped the company generate operating profits of Rs21bn ($252mn) in the three months to September, up from Rs16bn in the same quarter last year.

The resilient performance came even as overall revenues for the company’s collection of businesses — which also include mining, renewables and airports — dropped 40 per cent to Rs225bn.

The drop in sales was driven by Adani Enterprise’s coal trading unit, its largest, where revenues dropped 60 per cent to Rs125bn. The unit’s operating profits fell by just 10 per cent to Rs10bn.

Russia’s war in Ukraine and a reversion to coal-fired power in many countries lacking gas pushed the polluting fuel’s cost to extreme highs last year, but prices have since cooled. 

The operating margin Adani generated from coal trading was 8.2 per cent in the third quarter, more than double the 3.7 per cent reported for the same period last year.

Adani’s coal profits have been under scrutiny since the Financial Times reported last month that the group appeared to have inflated the cost of imported fuel. The report cited customs records that showed Adani used offshore intermediaries to import billions of dollars’ worth of coal at prices that were sometimes more than double market rates.

The group dismissed the FT report as “baseless” and “a clever recycling and selective misrepresentation of publicly available facts and information”, with a spokesperson saying that “coal procurement on long-term supply basis in India is done through an open, transparent, global bidding process thereby eliminating any possibility of price manipulation”.

Adani Enterprises, the oldest of the group’s 10 listed businesses, is itself a conglomerate with seven different operating segments. Operations classed as “others” are responsible for almost a quarter of sales, while “unallocable income” represented a similar proportion of operating profits.

The group reported climbing sales in some of its smaller businesses, such as airports and new energy businesses including solar power module manufacturing. 

Passenger numbers at the seven airports it runs were up 31 per cent year on year to 21.4mn, Adani Enterprises said, although profit at the airport segment was flat at Rs2bn.

Group chair Gautam Adani said promising results in relatively new business lines underscored the company’s value in setting up new divisions. 

“With many ventures now market-ready and thriving, our [half-year] results have been boosted by the core infra[structure] incubating businesses,” Adani said in a statement, calling it “a strong testament to our incubating ventures”.

Higher taxes for the three months, and a lower level of items “reclassified to profit” in the calculation of comprehensive income, resulted in net profit for the quarter falling to Rs2.3bn from Rs4.6bn year on year. 

Following the results release, shares in Adani Enterprises gave up gains made earlier in the day to close down 0.14 per cent at Rs2,214.90. The company’s stock price is down 42 per cent compared with the start of the year, following a blistering short seller attack by New York-based Hindenburg Research in January.

The Adani Group, whose assets span coal trading and mining to India’s biggest commercial ports operation, strongly denies Hindenburg’s allegations of stock price manipulation and accounting fraud. The results of an investigation into the allegations by India’s securities regulator have been repeatedly delayed.

Other Adani companies have reported strong quarterly results. Electricity division Adani Power posted a tenfold profit increase to Rs65.9bn, on the back of robust energy demand and a one-off tax gain. Profits at Adani Green Energy also soared.