Adani group is ‘deeply overleveraged’: Report

New Delhi: Richest Indian Gautam Adani’s ports-to-power-to-cement conglomerate is “deeply overleveraged” with the group predominantly using debt to invest aggressively across existing as well as new businesses, CreditSights, a Fitch Group unit, said on Tuesday.

 In a report titled ‘Adani Group: Deeply Overleveraged’, CreditSights said, “In the worst-case scenario, overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap.” Starting out as a commodities trader in the late 1980s, the Adani group has diversified from mines, ports and power plants into airports, data centers and defence. Recently, it forayed into the cement sector with a $10.5 billion acquisition of Holcim’s India units as well as into alumina manufacturing. Most of this has been funded by debt.

“Over the past few years, the Adani Group has pursued an aggressive expansion plan that has pressurized its credit metrics and cash flows,” CreditSights said. “The Adani Group is increasingly venturing into new and/or unrelated businesses, which are highly capital intensive and raises concerns regarding spreading execution oversight too thin,” it added.

While there is evidence of promoter equity capital injection into group companies, the Adani Group is exposed to moderate levels of governance and environmental, social, and governance (ESG) risks. The Adani Group has six listed entities on the Indian stock exchanges, and a few of its group entities have US dollar bonds outstanding. The six firms had a gross debt of Rs 2,309 billion as of FY22-end. Net debt after accounting for cash in hand was Rs 1,729 billion.

This has caused concerns about the Group as a whole, CreditSights said, adding that it remains cautiously watchful of the Group’s growing expansion appetite, which is largely debt-funded