Conglomerate’s aggressive expansion plans are putting pressure on credit metrics and cash flow, says Credit Sights
The conglomerate, led by billionaire Gautham Adani, has been aggressively borrowing to make large investments in multiple companies, some of which lack proven expertise. The group is heavily indebted and could end up in a debt trap, Credit sights, a unit of Fitch Group, said. Credit Sights said in a report released on Tuesday that Adani Group’s aggressive expansion plans are putting pressure on its credit metrics and cash flow, threatening it to fall into a debt trap and default at worst. I added that there is. Credit Sights is a data intelligence platform that provides credit market data to help you better understand your sourcing, portfolio exposure and delinquency.
The Adani Group is increasingly challenging new independent businesses that are highly capital intensive and have raised concerns that oversight of execution may be spread too thinly, the report said. “We see little evidence of promoters injecting capital into the group’s companies, which we believe is necessary to unwind their stretched balance sheets,” the report said. A large part of it is financed by debt,” she added.
A day after Adani Group overtook the competition as India’s most valuable conglomerate, Credit Sights released its assessment. The combined market capitalization of the Adani Group firms has surpassed that of the Mukesh Ambani Group companies, which was valued at 17.82 trillion rupees.
With operations from seaports to airports to energy, Adani Group is in the process of rapid diversification expanding into airports, data centres, healthcare services, cement, and green energy. But Credit Sights added that it took comfort in the group’s strong ties to banks and the Narendra Modi government. Adani Enterprises raised his £12.77 billion from the National Bank of India to fund Navi Mumbai’s international greenfield project. SBI also disbursed another loan of 6,000 kroner to finance Phase 1 of the Greenfield Copper Smelter Project in Gujarat. The company also raised his US$250 million loan from Standard Chartered Bank and Barclays Bank to fund the investment and development of his six airports managed by Adani Airport Holdings (AAHL).
Adani Green Energy is one of the Adani Group’s fastest growing companies and a pioneer in achieving the Group’s goal of investing US$20 billion in clean energy companies over the next decade. However, the Adani family owns majority stakes in five of the six publicly traded companies, according to the report, so all the family’s wealth and reputation are tied to the Adani Group of companies.
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