DBS has $1.3 billion exposure to Adani Group but CEO says bank is not concerned

This comes after Adani’s US$10.5 billion acquisition of Swiss construction materials company Holcim. PHOTOS: MARK CHEONG, REUTERS

SINGAPORE – DBS, Singapore’s largest bank, has made loans to the tune of $1.3 billion to India’s Adani Group but its chief executive is not concerned, citing its “tightly managed” exposure.

The bulk of DBS Bank’s exposure is its $1 billion loan for Adani’s US$10.5 billion (S$14 billion) acquisition of Swiss construction materials company Holcim’s cement business in India, completed in September 2022. DBS was among several backers of the deal.

CEO Piyush Gupta said the cement companies are completely debt-free. “They are solid, cash-generating companies, so we are not concerned about the exposure,” he told reporters at the bank’s results briefing on Monday.

The cement industry has huge potential, given the growth in the market, he added, “and so that exposure is quite tightly managed”.

The remaining $300 million of DBS’ exposure is from financing to a range of companies under the Adani Group, said Mr Gupta.

“Again, those companies are working well. Their cash flows are secure.

“We have no exposure to any of the shares of Adani or promoter financing of Adani, so we are not affected by all these changes in the share prices or promoter share prices. So right now, we have no concerns about exposure. We don’t expect to do anything (about it),” he added.

DBS earlier kicked off the local banks’ earnings season with a record quarterly net profit of $2.34 billion in the fourth quarter – a 69 per cent jump from $1.39 billion a year ago – as higher interest rates continued to boost its income.

Billionaire Gautam Adani on Feb 6 announced the prepayment of US$1.1 billion worth of loans backed by shares of three of the group’s listed firms as the conglomerate sought to soothe investor nerves.

This follows a US$110 billion share rout after United States short-seller Hindenburg Research released a report on Jan 24 accusing the group of stock manipulation and improper use of offshore tax havens.

The Adani Group rejected the allegations and banks in India have largely brushed off the concerns surrounding the conglomerate. However, foreign banks such as Citigroup, Credit Suisse and Standard Chartered Bank have reportedly stopped accepting bonds and other securities of the group as collateral for margin loans.

Asked whether he expects financing costs for Indian companies to rise as a result of the Adani turmoil, Mr Gupta said: “I don’t think so. If you look at India, pricing has always been exceptionally low. In fact, the Indian large corporates borrow at way below India country risk. So the general view that this is going to tarnish all of the industry, I don’t see that happening.”

DBS has been the most aggressive among local banks in expanding in India. In November 2020, it completed its takeover of Lakshmi Vilas Bank. It was the first time India turned to a foreign bank to rescue a struggling local lender.

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