Adani Group
Adani Group allays concerns about being overleveraged, says loans from PSBs halved
Gautam Adani-led Adani Group has responded to concerns about it being overleveraged citing an improved net debt to operating profit ratio and more than halving of loans from public sector banks, media reports said.
The conglomerate issued a 15-page note, rebutting a CreditSights report that called the group overleveraged, companies in the group have consistently de-levered, with the net debt to Ebitda ratio declining to 3.2 times from 7.6 times in the last nine years.
It maintained that the leverage ratios of its companies “continue to be healthy and are in line with industry benchmarks.” However, media reports said that the note used figures that differed from those cited by CreditSights in the report last month.
The report released by the Fitch Group unit, termed Gautam Adani's empire built “deeply overleveraged” owing to an expansion that “pressurized its credit metrics and cash flows.”
"In the worst-case scenario, overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap, and possibly culminate into a distressed situation or default of one or more group companies," it had said.
"The businesses operate on a simple yet robust and repeatable business model focused on development and origination, operations and management and capital management plan," the note read.
The group had a gross debt of Rs 1.88 lakh crore in March 2022 and net debt of Rs 1.61 lakh crore after considering the cash balance. While loans from public sector banks in 2015-16 accounted for 55 percent of all debt of the group firms, in 2021-22, borrowing from PSBs made up for 21 percent of all debt, it said.
Gautam Adani, 60, has ventured into diverse sectors from data centers to cement, media, power, coal, mining, and alumina.
He has also pledged to invest $70 billion in green energy to become the world’s largest renewable-energy producer.
In FY2016, private banks accounted for 31 percent of loans, which has now shrunk to 11 percent. Money raised through bonds has jumped from 14 percent of all loans to account for 50 percent now.
"Adani portfolio companies have successfully and repeatedly executed an industry-beating expansion plan over the past decade. While doing so, the companies have consistently de-levered with portfolio net debt to EBITDA ratio coming down from 7.6x to 3.2x, EBITDA has grown 22 percent CAGR in the last 9 years and debt has only grown by 11 percent CAGR during the same period," the group said.
"Over the last 10 years, we have actively worked to improve our debt metrics through our capital management strategy," it said.
The group has raised funds through "comprehensive equity" equal to $ 16 billion under a systemic capital management plan for six group firms in the last three years.
The funds were raised as a combination of primary, secondary and committed equity from global investors, including TotalEnergies, Abu Dhabi-based International Holding Company PJSC, QIA and Warburg Pincus.
"This has also resulted in the deleveraging of the promoter level debt, allowing the reduction in the promoter stake pledge in the listed companies," the note said.
It reckoned Adani Enterprises as having a ratio of earnings before interest, taxes, depreciation, and amortization (Ebitda) to the gross interest of 1.98 whereas CreditSights listed a figure of 1.6, according to media reports.
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