4 min readNew DelhiSep 4, 2022 10:32 AM IST
First published on: Sep 3, 2022 at 01:17 AM IST
The recent acquisition by the Adani Group of cement maker Holcim’s India businesses is expected to add another Rs 40,000 crore to the conglomerate’s debt, taking it to approximately Rs 2.6 trillion, an analysis by Credit Suisse showed.
The Gautam Adani-led Group has seen its debt levels increase over the past five years from Rs 1 trillion to Rs 2.2 trillion, fueled by the expansion of the ports business, investments in green energy, the acquisition of transmission business, and venturing into newer areas (Adani Enterprises) such as airports, roads and data centres. Analysts at Credit Suisse noted that while the gross debt levels may have risen, the group has managed to diversify its debt in favour of bonds and financial institution (FI) lenders with longer maturity tenors.
“As compared to about 86 per cent of debt maturing within five years at end-FY16 (debt levels of Rs 1 trillion), only 26 per cent of the debt is now maturing in less than five years,” they pointed out.
In terms of currency, approximately 30 per cent of the overall debt is denominated in foreign currency. Moreover, as the absolute levels of Indian bank loans to Adani have remained stable over the past five years, their share of the group’s total debt has come off significantly to just about 18 per cent.
The analysts have pointed out that while debt levels may have gone up, the cash flows for the group have also grown steadily, with more assets coming on stream and becoming operational. As such, the net debt/Ebitda at group level has come off to around 5 times in FY22, compared with a little less than 7.5 times in FY16. The interest cover for the group too has increased to more than twice now versus 0.9 times in FY16.
Overall, most group companies saw debt levels rise in FY22 as they continued to invest. However, barring Adani Transmission, the interest cover has remained stable for these entities with improving operations. Adani Green saw a good improvement in the operationalisation of assets, and consequently, the sharp jump in debt has not impacted the interest servicing ability of the firm.
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Recently, an analyst in the credit desk at Nomura Holdings in Hong Kong observed that with the Abu Dhabi-based International Holding Co (IHC) injecting $500 million into Adani Green Energy, the firm’s debt-to-capital ratio would fall. The equity infusion will help stabilise the company’s debt-to-capital ratio in the low 60 per cent range from 95.3 per cent at the end of March. IHC’s support “will be reflective when the company unveils its second quarter balance sheet details”, the analyst said, noting that the infusion of funds reflects Adani Green’s equity-ability to raise funds.
IHC has invested about $2 billion in three companies owned by Gautam Adani. The Adani conglomerate has committed to invest a total of $70 billion across its green energy value chain by 2030 to become the largest renewable energy producer.
While the analyst said Adani group’s aggressive expansion is a “negative overhang for credit investors as much of the M&A recently has been debt-funded,” he noted that the conglomerate has demonstrated prowess at locking down external investors to shore up capital. FE
The Gautam Adani-led Group has seen its debt levels increase over the past five years from Rs 1 trillion to Rs 2.2 trillion. 
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