Switzerland-based global financial major Credit Suisse is in the news for its stance taken on the bonds of some of the group entities of the Adani Group even as its equity research arm upgraded its recommendation on Adani Ports & SEZ Limited.
The private banking arm of Credit Suisse AG has stopped accepting bonds of some of the group entities of Adani Group -- Adani Ports & SEZ, Adani Green Energy, and Adani Electricity Mumbai – as collateral for margin loans, according to a report by Bloomberg.
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Simply put, the lending value of the bonds of the above-mentioned entities has been cut to zero for the private banking clients of Credit Suisse AG who will now have to top up their margins with other collateral or cash.
The report further added that the move by the Swiss major comes even as other banks continue to lend against bonds issued by Adani Group entities.
Interestingly, the decision of the Zurich-headquartered financial services major comes a day after its equity research arm upgraded Adani Ports & SEZ to an ‘Outperform’ rating from the earlier ‘Neutral’.
“We upgrade Adani Ports to Outperform from neutral based on attractive valuations (10x Sep 2024E EV/EBITDA) post recent correction. Strong underlying business (178 MT volumes and 1H FY23 EBITDA of ₹65.5 bn) with growth (Indian EXIM growth and company-specific share gains on incremental assets, etc) provide downside support,” stated the Credit Suisse report released on Tuesday.
“We upgrade to Outperform on attractive valuation and strong earnings growth outlook based on 9% cargo CAGR, 14% revenue and EBITDA CAGR and 20%+ earnings CAGR (driven by lower growth in depreciation and interest costs),” added the report while also acknowledging the risks like large capex plans in warehousing, inorganic acquisitions, and coal volumes.
The equity research arm of the Swiss major has a target price of ₹825 for Adani Ports – a premium of 68 per cent from the current market price of ₹492.15. Shares of Adani Ports & SEZ lost nearly 20 per cent or ₹120.65 on Tuesday.
The stock has lost heavy ground in the last five months after having touched its 52-week high of ₹987.90 on September 20, 2022. Incidentally, the shares touched their 52-week low of ₹459.60 during intra-day trading today.