Adani Group’s debt concern may be overstated: SES

Adani Group needs to provide a third-party audit of accounts to allay fears of shareholders, while the concern over group debt may be “overstated” as its businesses are independently resilient, according to proxy advisory firm SES. The reputation loss caused by Hindenberg Research’s report will impact all Adani Group companies in unequal measures, it said.

“In addition to the response to Hindenburg, who is not a stakeholder, Adani must care for its stakeholders (investors and lenders) and address all areas of concern. An independent third-party confirmation of its accounts would go a long way in establishing and restoring credibility,” said the report by Stakeholders Empowerment Services (SES), a corporate governance research and proxy advisory firm.

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On January 24, US-based Hindenberg Research released a report outlining numerous issues of suspected fraud at Adani Group, the second largest conglomerate in India run by the world’s then-third richest man. Following the report, the market cap of Adani group has crashed to nearly ₹9.25 trillion from the earlier ₹18.5 trillion.

“Looking at the group structure of Adani, SES is of the view that group debt concept concern may be overstated since each business appears to be independently resilient to muster required cash flows to service debt. With the exception that reputation loss will impact all companies, though in unequal measure on a case-by-case basis,” the report added.

On Adani Ports and Special Economic Zone, SES said its cash balances are sufficient to service debt till FY24 and banks were “adequately protected”. As on September 30, 2022, the firm’s total assets were close to ₹1 trillion, against which borrowings were less than ₹45,000 crore.

Adani Power is also able to service debts and cash flows, which will improve once it is able to realise all disputed amounts (already adjudicated in its favour by various courts) and there is no cause for alarm, it said. As on September 2022, its equity stood at ₹24,202 crore, it had a total debt of ₹45,000 crore, with free cash of ₹2,000 crore and a net debt of ₹43,000 crore, the report said.

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Adani Wilmar, a consistently profit-making FMCG company, is debt-free with cash balance and banks are adequately secured for their working capital with more than ₹8,000 crore of net worth. The cement companies, Ambuja Cements and ACC, also do not have any long-term debt, while Adani Total Gas has low debt and will be able to repay the entire debt with current and next 12 months cash generation, , according to SES.

Adani Green Energy, which has borrowings of ₹51,000 crore and asset base of ₹62,000 crore, has a total debt repayment of ₹13,500 crore till FY25. With ₹5,200 crore in hand, it needs to generate about ₹8,300 crore in the next two-and-a-half years. Since green energy finance is becoming easy to obtain and liberal repayment terms, the company should not face any problem, it said.

Adani Enterprises had a total debt of ₹40,000 crore as of September 30, and its debt repayments till 2029 are ₹17,000 crore (₹15,000 crore by end 2026). Assuming the same rate of cash generation, by 2026 it would generate around ₹12,000 crore additional cash and would have no problems in meeting its repayment liability, the report added.