Adani eyes Rs 90,000 cr EBITDA in 2-3 yrs

Recently, the group has made substantial investments in ports and completed significant projects across renewables, transportation and ports.

Embattled Adani group is eyeing a 20 per cent year-on-year growth in pre-tax profits to reach Rs 90,000 crore EBITDA in 2-3 years on the back of robust growth in businesses ranging from airports to energy, according to a company note.

Earlier this month, the group repaid loans aggregating $2.65 billion to complete a prepayment programme to cut overall leverage in an attempt to win back investor trust post a damning report of a US short seller.

The ports-to-energy conglomerate is now looking at robust growth in sectors such as airports, cement, renewables, solar panels, transportation and logistics, and power and transmission, it said adding several of Adani's new infrastructure investments will also begin to fructify and generate cash in the coming years.

Read: Hindenburg’s Adani strike adds pressure on already wary auditors

Adani is expected to see an increase of more than 20 per cent in EBITDA on a consolidated basis in the coming years as it drives robust and sustainable growth across its business portfolio. Its target EBITDA of over Rs 90,000 crore is expected by FY23, the note said.

In recent years, the group has made substantial investments in ports and completed significant projects across renewables, transportation and ports.

Businesses such as airports and renewables are also exhibiting improved cash flows. Its solid asset base, built over three decades, supports resilient critical infrastructure and ensures high asset performance throughout their life cycles.

The group's listed portfolio EBITDA increased 36 per cent yoy to Rs 57,219 crore in FY23 (April 2022 to March 2023 fiscal). Core infrastructure businesses, which constitute 82.8 per cent of the portfolio including energy, transport, logistics, and flagship Adani Enterprise Ltd's infrastructure ventures, registered a robust 23 per cent yoy growth in EBITDA to Rs 47,386 crore.

AEL's existing businesses also delivered a strong performance with a 59 per cent yoy growth to Rs 5,466 crore. AEL's existing businesses comprise 10 per cent of its portfolio.

With about 83 per cent of its EBITDA being generated from core infrastructure businesses, the Adani Group's portfolio operates in utility and infrastructure sectors, providing assured and consistent cash flows. The group has set its sights on growth across diverse sectors such as airports, cement, renewables, solar panels, ports, power, and transmission.

Last year marked a period of significant progress for Adani as its portfolio's robust growth of 36 per cent was simultaneously complemented by an effective deleveraging strategy as can be seen from its improved net debt to EBITDA ratio.

The portfolio's combined net debt to EBITDA improved to 3.27 times in FY23 from 3.8 times in FY22. The net debt to run-rate EBITDA improved to 2.8 times in FY22 from 3.2 times FY23 which highlights the group's strong financial discipline amidst the strong growth, the note said.

Management of the Adani Group affirms that there is no significant debt maturity looming in the near-term, indicating no material refinancing risk or near-term liquidity requirement.

The net asset value of gross assets stands at Rs 3,91,000 crore. Over time, the group has diversified its long-term debt portfolio and reduced its exposure to banks while expanding its funding sources. The current debt is distributed among bonds (39 per cent), global international banks (29 per cent), PSU and private banks and NBFC (32 per cent).

The group's exposure remains less than 1 per cent of total bank exposures in India, and leading Indian banks, including SBI and other PSUs have expressed comfort with its debt/equity to EBITDA of 3.2 per cent.

The group's dollar debt is also perfectly hedged, and the recent ECB interest rate hikes are expected to have minimal impact on debt costs and servicing as most of the ECBs are at a fixed rate, the note added.

Adani Group has made a full prepayment of $2.15 billion of loans that were taken by pledging shares in the conglomerate's listed firms and also another $700 million in loans taken for the acquisition of Ambuja Cement.

Further, the note states that the promoters completed the sale of shares in four listed group entities to GQG Partners, a leading global investment firm, for $1.87 billion (Rs 15,446 crore).

US short-seller Hindenburg Research in January released a damning report alleging accounting fraud and stock price manipulation at Adani Group, triggering a stock market rout that had erased about $145 billion in the conglomerate's market value at its lowest point.

Adani Group has denied all allegations by Hindenburg and is plotting a comeback strategy. The group has recast its ambitions as well as prepaid some loans to assuage investors.

Cash Balance and FFO (together at Rs 77,889 crore) are much higher than debt maturity cover for FY24, FY25 and FY26 of Rs 11,796 crore, Rs 32,373 crore and Rs 16,614 crore, respectively, at the combined portfolio level.