Adani Group says not overleaveraged, loans from public sector banks halved

Richest Indian Gautam Adani's conglomerate has cited an improved net debt to operating profit ratio and more than halving of loans from public sector banks to allay concerns about it being overleveraged.

In a 15-page note in response to CreditSights report calling the group overleveraged, it said 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.

"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, reviewed by PTI, said.

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.

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While loans from public sector banks in 2015-16 accounted for 55 per cent of all debt of the group firms, in 2021-22, borrowing from PSBs made up for 21 per cent of all debt, it said.

In FY2016, private banks accounted for 31 per cent of loans, which has now shrunk to 11 per cent. Money raised through bonds has jumped from 14 per cent of all loans to account for 50 per cent now.

In a report titled 'Adani Group: Deeply Overleveraged', CreditSights, a Fitch group firm, had last month stated that the 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.

"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.

Adani, 60, has in the last few years expanded his coal-to-ports conglomerate into airports, data centres, cement, aluminium and city gas.

"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 per cent CAGR in the last 9 years and debt has only grown by 11 per cent CAGR during the same period," the group said.

Using figures that differed from those cited by CreditSights in the report last month, Adani Group said the leverage ratios of its companies "continue to be healthy and are in line with industry benchmarks".

"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 $16 billion via "comprehensive equity" under a systemic capital management plan for half a dozen group firms over the past three years. They were raised through 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 listed Adani Enterprises as having a ratio of earnings before interest, taxes, depreciation and amortization (Ebitda) to the gross interest of 1.98, while CreditSights listed a figure of 1.6.