New Delhi:
Billionaire Gautam Adani’s embattled conglomerate said it has ample cash reserves and its listed companies are able to refinance their debts.
The comments came in a credit report to reassure investors after a critical review by US short-seller Hindenburg Research last month. Oversight of group companies’ cash position has intensified as they pay off loans, given that a spike in returns on Adani debt following the Hindenburg report would make refinancing prohibitively expensive.
The Adani Group’s gross debt stood at 2.26 trillion rupees ($27.3 billion) at the end of September and that figure is expected to remain stable until the end of March, according to the group’s release on Tuesday. The figure is broadly in line with the figure quoted by the company’s chief financial officer at the end of January.
The group’s cash balances rose from Rs 297.5 billion at the end of September to Rs 316.5 billion in December.
“Our businesses operate with long-term annuity contracts that generate assured and consistent cash flows without market risk,” the company said in the credit report.
Financial statistics
The financial health of Adani’s empire is under close scrutiny after Hindenburg accused it of inflating revenues and manipulating stock prices.
While most Adani notes rose on Wednesday, many of the securities are still at or near distressed levels. More than $125 billion has been wiped from the market’s capital since the short seller’s investigation went public.
In a sign of how costly any attempt at debt financing could now be for group companies, yields on a bond from Adani Green Energy Ltd rose. earlier this month by more than 36 percent and was last reported at about 25 percent.
More than 81 percent of Adani Group companies’ earnings before interest, taxes, depreciation and amortization came from infrastructure companies, which generate steady cash flow, the report found. Based on a current portfolio of assets worth more than 3.7 trillion rupees, it could generate profits of more than 600 billion rupees, according to the document. Financing is a “conservative” mix of debt and equity, it said.
Hindenburg’s claims
US-based Hindenburg Research accused the Adani Group of accounting fraud and stock manipulation in a January 24 report – allegations the Indian conglomerate denies.
Ahead of Tuesday’s report, Moody’s Investors Service expressed concern about Adani’s ability to raise capital or refinance maturing debt in the coming years.
S&P Global Ratings downgraded rating outlook for Adani Ports and Special Economic Zone Ltd. and Adani Electricity Mumbai Ltd. from stable to negative. “There is a risk that investor concerns about the group’s governance and disclosures may be greater than we currently factor into our ratings,” the company said.
All three major credit rating agencies left their ratings of Adani’s companies unchanged, something the Adani Group said “indicates underlying credit quality with an adequate financial profile,” in its Tuesday report.
This is not the first time that the debt burden of Adani’s companies has come under scrutiny. In August, CreditSights, part of the Fitch Group, described the conglomerate – whose operations span from ports to electricity – as “deeply overstretched”.
Adani Group refuted CreditSights’ assessment, while it has repeatedly denied Hindenburg’s allegations and threatened legal action.
Concerns about the group’s debts were pushed back into the global spotlight by Hindenburg, and the ensuing market crisis led the group to scrap its planned stock offering. The fallout threatens to have wider implications for India, given Adani’s ties to Prime Minister Narendra Modi’s infrastructure plans and Hindenburg’s claims that the group has escaped scrutiny.
The Adani founders and companies have prepaid loans worth $1.11 billion to release committed shares and pledged to lower leverage in the coming months. The port unit has announced plans to pay back some of its debt in the year beginning in April, while the conglomerate plans to prepay a $500 million bridging loan due next month.
(Disclaimer: New Delhi Television is a subsidiary of AMG Media Networks Limited, an Adani Group Company.)
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