Adani Group has been warned of being “deeply overleveraged” by Fitch Group company CreditSights in a report. It noted that the group’s debt funded growth plans could spiral into a massive debt trap in a worst-case scenario and lead to a possible distress or default. CreditSights said that Adani Group’s expansion has been reliant on bank loans, internal accruals and debt market funding with business diversification across the spectrum. The research company compares Adani Group to its peer Reliance Industries, noting that while both are competing for market share in a few new economy businesses, a key difference is that the latter has been on a deleveraging path. It added that Adani companies also have “poor interest cover and cash outflows across virtually all its entities, and is at greater financial risk”. Despite the negatives, CreditSights however does highlight that the group has healthy relations with the ruling party of the country, ensuring minimal opposition to its growth plans alongside the government’s infrastructure and technology impetus also lending support. Also, the report mentioned that Adani Group has “strong access to diverse funding channels (onshore and offshore banks and capital markets), relatively stable recurring-revenue generating infrastructure assets, presence in key sectors of the economy and the positive infrastructure-favored macro backdrop in the country”.
Adani companies’ dollar bonds have been trading weaker since the above report. For instance Adani Ports’ 5% 2041s are down over 1 point to 81.87, yielding 6.7%.
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