Fitch Group arm CreditSights on Thursday corrected EBITDA, gross debt estimates for Adani Transmission, Power, respectively, after it discovered calculation errors made by them. Its previous report highlighted that the Gautam Adani-led group has pursued an aggressive expansion plan that has pressurised its credit metrics and cash flows. Adani group increasingly venturing into new and/or unrelated businesses, which are highly capital intensive has also been raising concerns that execution oversight may be spread too thin, the research firm said. CreditSights clarification comes a day after the conglomerate refuted the claim made by the Fitch Group arm’s previously. On Wednesday, Gautam Adani’s group cited an improved net debt to operating profit ratio and more than halving of loans from public sector banks to allay concerns about it falling into a debt trap.
CreditSights, in a previous report, claimed that the aggressive expansion pursued by Adani group has put pressure on its credit metrics and cash flow, adding that in the worst-case scenario it may spiral into a debt trap and possibly a default. In a response to CreditSights report calling the group overleveraged, Adani group on Wednesday said that companies in the group have consistently de-leveraged, 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,” said the Adani group note, PTI reported.
Following a call with Adani conglomerate’s management, CreditSights on Thursday cited elevated leverage at one unit and for another the risk of future acquisitions hurting its credit profile. For Adani Transmission, CreditSights corrected EBITDA estimate from Rs 4,200 crore to Rs 5,200. As for Adani Power, the research firm has corrected their gross debt estimate from Rs 58,200 crore to Rs 48,900 crore. “These corrections did not change our investment recommendations,” CreditSights said in its report.
The Adani Group comprises 7 publicly traded companies – Adani Enterprises, Adani Green Energy, Adani Ports & SEZ, Adani Transmission, Adani Total Gas, Adani Power, Adani Wilmar. It may also be noted that the National Stock Exchange of India has announced that Adani Enterprises would be included in the Nifty 50 index in place of Shree Cement from 30 September 2022. After Adani Ports, this would be the second stock from the stable of billionaire Gautam Adani to be included in the index. The inclusion of Adani Enterprises on the Nifty 50 could result in a net inflow of around $213 million for the stocks counter, while Shree Cement will see an outflow of $87 million, according to Edelweiss Securities.