Adani Group debt data tweaked by CreditSights in toned down note

NEW DELHI: Debt research firm CreditSights dialed back on the severity of some of its language describing borrowings at billionaire Gautam Adani’s empire, after the group rebutted a report last month that called it “deeply overleveraged.”
In a Sep.7 note published after discussions with the group’s management, CreditSights flagged “elevated” leverage for Adani Green Energy Ltd. and the risk of future acquisitions hurting the credit profile of Adani Ports and Special Economic Zone Ltd. But there was no mention of the group being “deeply overleveraged” in the report.
The Fitch Group unit also corrected figures it had used in the late-August report concerning profit at Adani Transmission Ltd. and Adani Power Ltd.’s debt. “These corrections did not change our investment recommendations,” the analysts including Pramod Shenoi wrote. “We are presenting this piece to reconcile our calculations with Adani Group’s presentation.”
CreditSights didn’t immediately respond to an emailed query to clarify if they still view the conglomerate as deeply leveraged.
The ports-to-power conglomerate, under Adani — now world’s third-richest person — has rapidly diversified from its coal-based businesses to a myriad of non-related sectors including airports, data centers, digital services and media in past few years. The breakneck expansion has added to the financial complexity of the conglomerate as well as added debt, which was red-flagged by the credit research firm last month.
Adani rebuttal
In a 15-page rebuttal earlier this week, the Adani Group said that the leverage ratios of its companies were “healthy” and there was consistent paring down of the debt. It had also put out debt numbers and related ratios for its group firms that differed from statistics cited by CreditSights. Additionally, it cited the equity infusion by several global companies such as TotalEnergies SE.
In its latest note, the credit research unit watered down some of its earlier criticism but held its ground on other fronts.
“For several Adani companies, and in particular Adani Green Energy, the investment strategy is aggressive, which we expect to be largely funded with debt, and which we believe will not allow for its gross and net leverage to reduce,” CreditSights analysts wrote in the note.
Here are some of the other highlights from the latest research note:
– Leverage ratios are elevated and capital structures are skewed toward debt, which is still “a matter of concern” despite investments by foreign firms
– Adani’s investment plan provides a “visible path for debt to increase” but a “less transparent path for EBITDA to grow,” particularly in far-off years
– Flagship Adani Enterprises Ltd.’s elevated leverage to likely to remain so in coming years as it’s the incubator of group’s new businesses and in a “multi-year capex cycle”
– Adani Total Gas Ltd.’s balance sheet appears “extremely healthy” and will likely remain so
– Acknowledged Adani Group’s use of some specific leverage metrics to present its case but defended the financial figures they used for analysis as “appropriate”
While the initial CreditSights report last month hurt the Adani Group firms’ stocks, many of them have rebounded since and boosted tycoon’s Adani’s wealth to almost $143 billion.
Adani Green Energy’s September 2024 dollar bond has lost 3.4% since Aug. 23, while that issued by Adani Ports maturing in July 2029 fell 1.6%.