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Bankers: Adani Group’s debt secured by cash flows, assets –

MUMBAI: Bankers say that Adani Group’s borrowings are secured by assets, and group companies have the required cash flows to service loans. Lenders say credit quality will be unaffected by the outcome of the holding company’s public issue or the crash in share prices. However, the group has pledged a major chunk of its Ambuja Cements holdings and may have to offer fresh equity as security to foreign lenders to compensate for the share price fall.
Bankers point out that Adani Power has 20 gigawatts of power generation, giving the power assets a value of close to Rs 1 lakh crore as against the debt of Rs 35,000 crore. Similarly, Adani Ports is also generating enough cash to service its loans. Lenders said that Adani Enterprises has already achieved financial closure of the Navi Mumbai airport, which has a debt requirement of over Rs 12,000 crore. Among forthcoming investments, the group has won the bid to redevelop the Dharavi slum in Mumbai. But debt for this project is yet to be raised.
Top five companies of the Adani Group in terms of debt have a total debt of Rs 2.1 lakh crore, a CLSA report said. Of this, only 40% of the debt is with Indian banks – public sector banks account for 30% and private banks the remaining 10%. These top five companies are Adani Power, Adani Green, Adani Ports, Adani Enterprises and Adani Transmission. The overall group debt with Indian banks is estimated to be around Rs 1 lakh crore.
“We estimate that banking exposure to Adani Group is 0.6% of system loans as bank debt stands at less than 40% of total group borrowing. Within this, PSU banks’ exposure as a share of their loans is 0.7%, with the figures for some banks potentially at more than 1% of loans, while for private banks, the exposure is 0.3% of loans,” said CLSA in its report.
According to the group, there has been deleveraging at the promoter level which has resulted in a drop in percentage of promoters shares pledged. Pledged shares of the group stand at 3% for Adani Enterprises, 4% for Adani Green, Adani Transmission (7%) and Adani Ports & SEZ (17%).The biggest recent borrowing by the group was the Rs 42,000 crore for the Holcim acquisition. Funds for the acquisition were entirely raised from foreign banks, including Japanese lenders Mizuho, MUFG and SMBC. The Adani Group has pledged its holding of the cement company to raise funds. Bankers say that if there is a crash in the share price, lenders will demand additional security. It is not clear whether shares of group companies can be offered as security.
A senior banker said lenders to the cement deal did not face much risk as the cement companies were a valuable asset and JSW had offered $7 billion for the company, which is more than the promoter’s debt.