India’s wealthiest conglomerate Gautam Adani cited an improving net debt-to-operating profit ratio and a cut in public sector bank lending by more than half to ease fears of over-indebtedness.
In a 15-page memo in response to CreditSights’ report calling the group over-indebted, he said the group’s companies have been systematically deleveraging, with the net debt-to-Ebitda ratio declining to 3.2x from 7.6x during of the past nine years.
“The companies operate on a simple yet robust and repeatable business model focused on development and creation, operations and management, and the capital management plan,” says the memo, reviewed by PTI.
The group had a gross debt of ₹1.88 lakh crore in March 2022 and a net debt of ₹1.61 lakh crore after cash balance review.
While in 2015-2016 loans from public sector banks represented 55% of the total debt of the group’s companies, in 2021-22 borrowings from PSBs represented 21% of the total debt, he said. declared.
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In FY16, private banks accounted for 31% of lending, which has now fallen to 11%. Money raised through bonds has gone from 14% of all loans to 50% now.
In a report titled “Adani Group: Deeply Overleveraged,” CreditSights, a Fitch Group company, said last month that the ports-electricity-cement conglomerate was “deeply overleveraged,” with the group primarily using debt to invest aggressively. through existing and new businesses.
“In the worst case, overambitious debt-financed growth plans could end up turning into a huge debt trap, and possibly result in a distressed situation or the default of one or more companies in the group. “, he had declared.
Adani, 60, has in recent years expanded his coal-ports conglomerate into airports, data centers, cement, aluminum and town gas.
“Adani’s portfolio companies have successfully and repeatedly executed an industry-leading expansion plan over the past decade.
“In doing so, companies have consistently deleveraged, with portfolio net debt to EBITDA ratio dropping from 7.6x to 3.2x, EBITDA has grown 22% CAGR over the past 9 years and debt grew only 11% CAGR over the same period,” the group said.
Using different figures than those cited by CreditSights in last month’s report, the Adani Group said its companies’ leverage ratios “continue to be healthy and in line with industry benchmarks.”
“Over the past 10 years, we have worked actively to improve our debt metrics through our capital management strategy,” he said.
The group has raised $16 billion through “global equity” as part of a systemic capital management plan for half a dozen group companies over the past three years. They were raised through a combination of primary, secondary and committed equity from global investors including TotalEnergies, Abu Dhabi-based International Holding Company PJSC, QIA and Warburg Pincus.
“It also resulted in the deleveraging of debt at the developer level, allowing the reduction of the pledge of the developer’s stake in listed companies,” the note said.
It listed Adani Enterprises as having an earnings before interest, tax, depreciation and amortization (Ebitda) to gross interest ratio of 1.98, while CreditSights listed a figure of 1.6.