(Bloomberg) -- The renewable energy unit of billionaire Gautam Adani’s empire is at risk of missing key growth targets unless it resorts to a share issue to consolidate its finances, according to a report by Snowcap Research. 

Adani Green Energy Ltd., a company within the sprawling conglomerate of India’s second-richest man, is falling short of its stated return targets, London-based Snowcap said in a 51-page report on Thursday. The lower returns, coupled with rising debt-financing costs, mean the firm may not have sufficient funding to meet its 2030 renewable energy goal.

The company “can meet just 50% of its 50GW target funding requirement by 2030 without raising equity, despite claiming this target is ‘fully funded’,” Snowcap said. 

It added that Adani Green isn’t meeting a target announced in 2021 of returning 17% on capital through 2025. Based on Snowcap’s analysis, Adani Green more likely delivered an 11-12% return on capital on projects completed over the past three years — in line with the company’s peers — at a 9.5% cost of debt.

A representative for Adani Green said the company “categorically rejects” the analysis published by Snowcap. 

‘False Allegations’

“The report is baseless, factually inaccurate, and contains analytical errors and false allegations, all intended to negatively impact” the company’s share price, the representative said, adding that management stands by its public disclosures.

Adani Green’s shares fell as much as 2.2% in Mumbai after the report was published but erased some of those losses soon after. The flagship for the group, Adani Enterprises Ltd., slipped as much as 2.6% on Thursday.

Snowcap’s criticism comes more than a year after the Adani Group was jolted by allegations brought by short-seller Hindenburg Research. The US-based firm’s accusations of corruption and market manipulation initially wiped more than $150 billion off the Adani Group’s market value. Adani has repeatedly denied wrongdoing and those stock losses have largely been recouped.

Read more: Adani Credit Facilities Send a Chill Through ESG Markets

Snowcap says it holds no positions in or against Adani Green, which is roughly 56% owned by units controlled by Gautam Adani, while TotalEnergies SE holds about 20%. The short-seller, which is run by brothers Henry and Chris Kinnersley, says limited liquidity combined with regulatory hurdles in India make it hard to place a contrarian bet. 

What Adani Green Says:

The company has “strong equity capital access with leading international investors,” including TotalEnergies, GQG Partners and Qatar Investment Authority, it said in its comment to Bloomberg News.

Adani Green has raised equity investments of over $5 billion since April 2020 and project financing of more than $3.4 billion, the company said.

“The deep interest by long-term investors, strategic partners, financial institutions, and banks, coupled with continued promoter commitment, gives assurance that AGEL will achieve its target of 50 GW of renewable capacity by 2030,” Adani Green said.

India, the world’s third-largest emitter of greenhouse gases, has set a target to triple non-fossil capacity by 2030. The country says it’s undergoing the world’s largest expansion plan in renewable energy, and companies that are seen to be helping it achieve these goals gain access to a range of state incentives. 

In the Khavda region of Gujarat state, Adani Green is building the world’s largest renewables park, a 30 gigawatt project. As India’s biggest renewable energy company, any setback in its ambitious plans could jeopardize the country’s green push. 

Read more: Gautam Adani Sells the World a Green Dream Built on Coal

In early May, Adani Green said its fourth-quarter profit dropped 70% from a year earlier, though it said that was in large part due to exchange-rate effects.

The company has managed to attract a number of investors with sustainable mandates to its bond auctions. Robeco Institutional Asset Management BV and the investment arm of Banque Lombard Odier & Cie SA were among buyers of a green bond earlier this year, through which Adani Green and associated firms raised more than $400 million.

 

--With assistance from Rajesh Kumar Singh, Advait Palepu and P R Sanjai.

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