RBI seeks details from banks on exposure to Adani firms

When contacted, an RBI official declined to comment on the development.

After Credit Suisse stopped accepting bonds of Adani Group companies as collateral for margin loans to its private banking clients, Citigroup’s wealth unit has also stopped extending margin loans to its clients against securities of Adani group companies. “This might have prompted the regulator to step in,” said a banking source.

Market regulator SEBI has not announced any probe into the crash in Adani shares and the withdrawal of Rs 20,000-crore FPO. Markets were intrigued by the last-minute subscription and identity of foreign investors, high net worth individuals and family offices of business groups that are said to have invested in the FPO.

When contacted, a Sebi spokesperson did not respond.

“There has been no official communication from the Reserve Bank, but they have informally sought details about our fund and non-fund exposures (to the Adani Group). The finance ministry is also very closely watching it,” said an official with a public sector bank.

“We have been asked for information on our total exposure and outstanding to the Group, bond outstanding and investments in commercial papers as at end-December 2022 and end-January 2023,” said another banker.

Meanwhile shares of Adani Group companies continued to remain under pressure Thursday. The steepest fall was in Adani Enterprises while shares of Adani Transmission, Adani Green Energy and Adani Total had fallen 10 per cent and Adani Ports was down 6.13 per cent, while Adani Power and Adani Wilmar were down 5 per cent each.

Ambuja Cements gained 5.33 per cent and ACC was up 0.05 per cent. With this, the market capitalisation of Adani companies has fallen by $100 billion (around Rs 820,000 crore) after the Hindenburg report came out over a week ago.

The Sensex, however, rose 224 points, or 0.38 per cent, to 59,932.24 and the NSE Nifty closed 5.90 points down at 17,610.40.

The Adani group has a consolidated debt of over Rs 2 lakh crore. Bloomberg, which had reported on Wednesday that Credit Suisse Group AG had stopped accepting bonds of Adani Group companies as collateral, said in another report Thursday that Citigroup Inc’s wealth arm had stopped accepting securities of Adani Group of firms as collateral for margin loans.

While State Bank of India (SBI) is yet to officially disclose its exposure, sources said it could be over Rs 21,000 crore. Punjab National Bank (PNB) said its total exposure to the Adani Group of Rs 7,000 crore is backed by adequate cash flows and there is no worry on repayments at present. The lender has a fund-based exposure of Rs 6,300 crore and a non-fund exposure of Rs 700 crore to various companies of the Group, said the bank’s managing director and CEO, A K Goel.

Bank of Baroda has an exposure of Rs 4,000 crore. Other banks have not yet disclosed their exposure. SBI’s exposure to the Adani Group is well below the Large Exposure Framework (LEF) of the RBI and is secured by cash generating assets with adequate TRA (trust and retention account) / Escrow mechanism in place and so debt service will not be a challenge, SBI said.

Last week, Swaminathan J, Managing Director (corporate banking & subsidiaries), SBI, had said the Indian banking system’s exposure to the group as a percentage to their total debt has been declining over the last two-three years.

During the same period, their debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) also has been getting better, which helps the group service its obligations comfortably.

“As is known, most of their acquisitions have been financed through overseas borrowings and market instruments, hence there is no exposure built up to the Indian banking system on this count,” Swaminathan said.

According to a report by investment firm CLSA, the top five Adani group companies — Adani Enterprises, Adani Ports, Adani Power, Adani Green and Adani Transmission — have a consolidated debt of Rs 2.1 lakh crore.

Indian banks’ exposure is less than 40 per cent of the total group debt. Within this, private banks’ exposure is less than 10 per cent of total group debt.

The CLSA report estimates that banking exposure to Adani Group is 0.55 per cent of system loans as bank debt stands at less than 40 per cent of total group borrowing.

Within this, PSU banks’ exposure, as a share of their loans, is 0.7 per cent, with figures for some banks potentially at more than 1 per cent of loans, while for private banks the exposure is 0.3 per cent of loans, CLSA said.

The National Stock Exchange (NSE) Thursday put Adani Enterprises Ltd, Adani Ports and Special Economic Zone Ltd and Ambuja Cements under Short-Term Additional Surveillance Measure (ASM). This means there will be additional margins in trading in these stocks – investors have to pay more upfront while taking positions.

The objective of the ASM category is to advise and alert investors to be extra cautious while dealing in stocks put in the category. The NSE move has come after Adani Enterprises plunged 26.50 per cent and Adani Ports fell 6.13 per cent.

“Applicable rate of margin shall be 50 per cent or existing margin, whichever is higher, subject to maximum rate of margin capped at 100 per cent with effect from February 6, 2023 on all open positions as on February 3, 2023 and new positions created from February 6, 2023,” NSE said.

Adani Green Energy and Adani Transmission are already under the ASM category. Adani Green Energy fell 10 per cent on Thursday despite being in the ASM category.