State-owned lenders have a “material” exposure to the Adani Group at 30% of the group debt, analysts at CLSA wrote on Thursday. “For PSU banks, the exposure is more meaningful at 0.6% of loans and 5% of FY24 net worth,” they observed. The brokerage pegged the group’s consolidated debt at Rs 2.1 trillion, aggregating the consolidated debt of the top five companies and allowing for some element of double counting. “One caveat is that we are not aware of non-funded exposures that PSU banks might have extended,” the analysts wrote.
The total exposure of Indian banks is a shade less than 40% of the total debt and amounts to approximately Rs 80,000 crore across five to six companies, in FY22. Within this, the exposure of private banks is below 10% of total group debt and lenders like ICICI Bank and Axis Bank have indicated that they have largely financed assets with strong cash flows, such as airports or ports.
It noted that while debt levels have doubled from Rs 1 trillion to Rs 2 trillion in the past three years, bank debt has increased by more than 25%. The share of bank debt in overall group debt has reduced materially and the analysts estimate that incrementally banks have only lent Rs 15,000 crore or 15% of the Rs 1 trillion that the group companies have borrowed over the past three years.
“Most of the incremental funding to the group for new businesses and acquisitions has come via overseas sources,” the analysts said. Large acquisitions, such as cement, have been fully funded by foreign banks. A greater part of the group’s funding now comes from bonds at 37% (funding ports and the transmission business) and from foreign banks (18% of debt). CLSA pegged the gross debt to Ebitda ratio for the Adani Group at 5.52.