Enough cash, no concerns on debt servicing, says Adani Group

The Adani Group on Monday said that it has enough cash to service debt at all group firms in the next 12 months, in one of its first statements since the indictment of founder Gautam Adani by US federal prosecutors last week.

The group also released two presentations detailing its financial performance and credit profile, in what is seen as a bid to soothe investors’ nerves. Combined cash flows in the past 12 months were more than the annual debt repayments projected for each of the next 10 financial years, the Adani Group said in its press release. This, it said, highlights that its earnings can manage its debt repayment obligations.

“Each of the portfolio companies has sufficient liquidity to cover all debt servicing requirements for at least the next 12 months,” the press release said. “Cash reserves now stand at ₹53,024 crore - 20.53% of gross debt. This amount is sufficient to cover next ~28 months of debt servicing requirements,” it said.

The Adani Group, which includes 11 listed firms, made cumulative earnings before interest, tax, depreciation and amortization (Ebitda) of ₹83,400 crore in the past 12 months. This was 17% higher than the corresponding number for the previous year. Over this period, these businesses generated fund flow from operations (FFO) of ₹58,908 crore, which was 28% higher year-on-year. Upcoming debt maturities for each year until FY34 are less than the FFO generated in the last 12 months, the Adani Group said.

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The sprawling ports-to-edible oil conglomerate has aggregate long-term borrowings ₹2.38 trillion and a cash balance of ₹53,024 crore. This translates to a net long-term debt of ₹1.85 trillion and a net debt to Ebitda ratio of 2.46. The group also has ₹20,724 crore of short-term working capital debt.

Cheaper international funds

While the Adani Group has brushed aside concerns over its ability to repay lenders, its ability to borrow fresh capital overseas remains under a question mark. Half of the group’s ₹2.38 trillion long-term debt has been borrowed from overseas, including bank loans and bonds.

Overseas debt available at a relatively lower cost compared to domestic borrowings has been instrumental in funding the blistering growth of the Adani Group over the past decade.

“Except for (Adani Green Energy), we understand that the Adani companies do not need to raise more capital at this point. If they do need additional financing, this cloud [sic.] will restrict their ability to access foreign capital,” GQG Partners, a leading investor of Adani Group firms, said in a note to its investors on Thursday.

“However, there are currently no signs of domestic banks, especially India’s government-owned banks, of shutting off credit to the Adani group,” GQG said. Domestic bank loans account for 42% of Adani Group’s long-term debt, with the State Bank of India being the largest domestic lender. Domestic capital markets account for another 5% of Adani’s long-term borrowings.

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Adani Group did not respond to a detailed questionnaire sent on Sunday.

The US Department of Justice and the US Securities and Exchange Commission have charged Gautam Adani, Adani Green Energy executive director Sagar Adani, and the company’s managing director Vneet Jaain with allegedly paying bribes to government officials in India in exchange for favourable solar power supply agreements. They also withheld this information from investors when raising loans and selling bonds in the US, thus committing securities fraud, the US federal prosecutors said. The Adani Group has denied all allegations and said it will explore legal recourse.