Adani Group touts cash reserves in bid to calm investors

More than US$125 billion (S$166 billion) has been wiped from Adani's stock market value since the short seller’s investigation went public. PHOTO: REUTERS

MUMBAI - Indian billionaire Gautam Adani’s embattled conglomerate has said it has adequate cash reserves and its listed companies are able to refinance their debts.

The comments came in a credit report aimed at reassuring investors after a critical investigation by US short-seller Hindenburg Research in January.

Scrutiny of the cash position of group companies has intensified as they pay down borrowings, given that a spike in yields on Adani debt after the Hindenburg report would make refinancing prohibitively expensive.

Adani Group’s gross debt stood at 2.26 trillion rupees (S$36.2 billion) at the end of September, and that amount is forecast to remain steady until the end of March, according to the group’s release on Tuesday.

The figure broadly matches the tally cited by the firm’s chief financial officer at the end of January.

The group’s cash balances increased to 316.5 billion rupees in December from 297.5 billion rupees at the end of September, it said.

“Our businesses operate on long-term annuity contracts generating assured and consistent cash flows with no market risk,” the company said in the credit report.

The financial health of Adani’s empire is under intense scrutiny after Hindenburg accused it of inflating revenues and manipulating stock prices.

While most Adani notes edged up on Wednesday, many of the securities are still indicated at or near distressed levels. More than US$125 billion (S$166 billion) has been wiped off its stock market value since the short-seller’s investigation went public.

In a sign of just how costly any attempted debt financing for group companies could now be, the yield on an Adani Green Energy bond spiralled more than 36 per cent earlier in February, and was last indicated at about 25 per cent.

More than 81 per cent of the earnings before interest, tax, depreciation and amortisation of Adani Group companies came from infrastructure businesses, which generate a steady cash flow, the report showed.

Based on a current portfolio of assets worth more than 3.7 trillion rupees, it stands to generate earnings of more than 600 billion rupees, according to the document.

Financing is a “conservative” mix of debt and equity, it said.

Hindenburg’s claims

Hindenburg accused Adani Group of accounting fraud and stock manipulation in a Jan 24 report – allegations the Indian conglomerate denies.

Prior to Tuesday’s report, Moody’s Investors Service cited concerns about Adani’s ability to raise capital or refinance maturing debt in the coming years.

S&P Global Ratings cut the rating outlook for Adani Ports and Special Economic Zone and Adani Electricity Mumbai to negative from stable.

“There is a risk that investor concerns about the group’s governance and disclosures are larger than we have currently factored into our ratings,” it said.

All three major credit assessors left their ratings on Adani’s companies unchanged, something Adani Group said “signifies the underlying credit quality with adequate financial profile” in its report on Tuesday.

This is not the first time the debt load of Adani’s companies has faced scrutiny.

In August, CreditSights, a Fitch Group unit, described the conglomerate – whose businesses span ports to electricity – as “deeply overleveraged”.

Adani Group rebutted the CreditSights assessment, while it has repeatedly denied Hindenburg’s allegations and threatened legal action.

The concerns about the group’s debts were propelled back into the global spotlight by Hindenburg, and the ensuing market rout prompted the group to scrap its planned stock offering.

The fallout risks having wider implications for India, given Adani’s links to Indian Prime Minister Narendra Modi’s infrastructure plans and Hindenburg’s allegations that the group escaped proper scrutiny.

Adani’s founders and companies have prepaid loans worth US$1.11 billion to release pledged shares and promised to lower leverage in the coming months.

The ports unit has announced plans to repay some debt in the year starting in April, while the conglomerate plans to prepay a US$500 million bridge loan due in March.


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