Adani Group says companies have sufficient liquidity, assures investors about servicing debt obligations

New Delhi, Nov 25 (PTI) Billionaire Gautam Adani's conglomerate on Monday showcased its cash reserves and profits that are enough to service debt obligations as well as meet growth plans as it reassured investors about business as usual despite a US bribery indictment against the founder.

The ports-to-energy conglomerate, whose chairman Adani and two other executives have been indicted in a US court for allegedly bribing Indian officials to secure solar power contracts, in a presentation to investors highlighted cash balances of ₹55,024 crore exceeding long-term debt repayments for the next 28 months. 

Equity now accounts for almost two-thirds of its total asset creation, a stark contrast to five years ago. In the past six months, the group invested close to ₹75,227 crore against a total debt increase of only ₹16,882 crore.

A note was also shared with the investors, along with the presentation.

Outlining the group's liquidity position, the note said, "Adani portfolio companies have sufficient liquidity to cover all debt servicing requirements for at least 12 months. As of September 30, 2024, Adani portfolio companies had cash of ₹53,024 crore, which was close to 21 per cent of its total gross debt outstanding."

This amount, it said, was sufficient to cover the next 28 months of debt servicing requirement. 

Growth Without Debt

In the past, the group had announced plans to invest more than ₹8 lakh crore (USD 100 billion) across portfolio companies in the next 10 years.

Fund Flows from Operations (FFO) or cash profits stood at ₹58,908 crore for the past 12 months and grew at over 30 per cent during the last five years. On this basis, even after assuming no growth, the group will be able to invest ₹5.9 lakh crore only from its internal cash accruals over the next 10 years, leaving very little dependency on external debt.

Further, at the portfolio level, there is a very low debt gearing of 2.46x -- which means it has massive headroom for debt, according to the presentation.

Other highlights from the presentation included EBITDA (earnings before interest tax and depreciation) for the past 12 months, which it said was highly stable and, hence, predictable due to its infrastructure projects, grew by 17 per cent to ₹83,440 crore. 

Existing annual cash flows alone can pay the entire debt in three years.

Gross assets or investments increased by ₹75,227 crore against a total debt increase of only ₹16,882 crore. The asset base has now increased to ₹5.5 lakh crore.

Average cost of borrowing is at 8.2 per cent, the lowest in five years, due to upgrades in ratings across group companies, it said.

The Adani Group's long-term debt from domestic banks is ₹94,400 crore. This stands against a cash balance of ₹53,024 crore, most of which is parked with Indian banks.

Borrowings from global banks are 27 per cent of total debt.

Adani said 62 per cent of its total revenue and 87 per cent of earnings before interest, tax, depreciation and amortization (EBITDA) were derived from its core infrastructure business.

Net debt to EBITDA at 2.46x - against guidance of 3.5x-4.5x. Also, its gross assets to net debt ratio improved to 2.7 times during the first half of the current fiscal year compared to 2.63 times in the previous year. 

Funding

The Adani group presentation to investors came as doubts were being expressed over its ability to raise funds overseas following the US indictment against its founder chairman Gautam Adani and seven others including his nephew Sagar, for being part of an alleged USD 265 million bribery scheme.

Some global banks and financial institutions were reportedly considering temporarily halting fresh credit to the group.

Last week, S&P Ratings had said it will watch for any signs of weaker funding access or concerns from existing lenders -- which could be demonstrated by the lowering of funding limits, non-renewal of facilities, or significantly higher credit spreads.

After the news of the indictment broke, equity and bond prices across Adani group companies have fallen sharply.

The group cancelled a USD 600 million concluded bond sale.

This indictment is independent of, but follows, a short-seller report last year, which hit equity and bond prices across the group although these had subsequently recovered.

The group, which had denied all allegations levelled by US short-seller Hindenburg Research, has also dismissed the allegations in the US indictment as baseless and has said it would seek all possible legal recourse.

Its CFO Jugeshinder Robbie Singh on Saturday stated that the group would respond to the US allegations after a detailed review of the legal filing and after advice from its counsel.