Hindenburg-hit Adani Group has $2-bn bonds due for repayment in 2024

The Adani group has said that it has almost $2 billion worth of foreign-currency bonds repayment due in 2024. The fact surfaced during a presentation the conglomerate made to investors in a meeting. The Gautam Adani-led conglomerate borrowed over $10 billion in foreign currency bonds between July 2015 and 2022 across group companies. Of this, $1.15 billion of bonds matured in 2020 and 2022. 

There are no other maturities in 2023 but three issuances - $650 million by Adani Ports and two of renewable energy unit Adani Green Energy Ltd ($750 million and $500 million) are due for payment in 2024, a PTI report stated. 

The Adani Group’s financial health has been under intense scanner after it witnessed massive stock selloffs since the Hindenburg Research released its report accusing the group of brazen stock manipulation and accounting fraud schemes over the course of decades. Adani group's gross debt has grown from Rs 1.11 lakh crore in 2019 to Rs 2.21 lakh crore in 2023, according to the presentation made to investors last month. 

After including cash, the net debt was Rs 1.89 lakh crore in 2023. There are no foreign currency bond maturities in 2025 but have $1 billion of repayments due in 2026. 

The company management, including group chief financial officer Jugeshinder Singh, last month held roadshows in Singapore and Hong Kong to reassure investors that the company's finances are under control. These are to be extended to Dubai, London and the US from March 7 to 15. Executives told investors they will address upcoming debt maturities including potentially offering private placement notes and using cash from operations, the PTI report said. 

Loan repayment  

Last week, Karan Adani, CEO and Whole Time Director of Adani Ports and Special Economic Zone, said that Adani Ports said on Tuesday it expects to repay loans, including bonds, worth Rs 5,000 crore next financial year. Its cash and cash equivalent were Rs 6,257 crore as of Dec. 31, while its net debt was Rs 39,277 crore. 

He said APSEZ is targeting FY24 EBITDA of Rs 14,500 crore-15,000 crore. Besides an estimated capital expenditure of Rs 4,000 crore-Rs 4,500 crore, we are considering total loan repayment and prepayment of around Rs 5,000 crore, which will significantly improve our net debt to EBITDA ratio and bring it closer to 2.5x by March 24. 

Also read: SC verdict on Adani-Hindenburg row: Adani group m-cap up Rs 23,400 crore, Adani Enterprises shares rally 14%

 

Debt concerns 

Last week, Adani Group shares lost a major chunk of their value after valuation guru Aswath Damodaran said the group collectively carries about three times as much debt as it should, adding that the group is overleveraged. 

In his latest blog, Damodaran pointed out good and bad reasons for borrowing and also talked about the right financing mix. He said Adani Enterprises, in his assessment, carries too much debt, with actual debt more than double its optimal debt. He said reducing Adani Enterprises' debt load will not just lower its risk of failure, but also lower its cost of capital.

Damodaran, a professor of finance at New York University’s Stern School of Business, said there was little, if any, benefit in terms of value added to Adani from using debt, and significant downside risk, unless the debt was being subsidised by someone. That could be government, sloppy bankers, and green bondholders, he added. 

“In my assessment, Adani Enterprise Ltd carries too much debt, with actual debt of Rs 413,443 million more than double its optimal debt of Rs 185,309 million, and reducing its debt load will not just lower its risk of failure, but also lower its cost of capital," Damodaran said in his latest Musings on Markets. 

Hindenburg, too, had flagged the high debt of Adani and said the stocks of the seven listed group companies were 85 per cent overvalued. This prediction came out somewhat true as most of the stocks of the group have crashed 70-80 per cent in over a month. 

The short seller claimed that the group was indulging in stock manipulation and fraud by using a wave of shell firms. It said key listed Adani companies have taken on substantial debt, including pledging shares of their "inflated stock for loans", putting the entire group on precarious financial footing. 

According to a report by brokerage CLSA, the banking sector accounts for about 40 per cent of Adani Group’s total debt. Private banks hold less than 10 per cent of the group’s total debt, while government-controlled banks account for 30 per cent.  

State Bank of India has the highest exposure, at Rs 27,000 crore, followed by Punjab National Bank at Rs 7,000 crore, Bank of Baroda at Rs 5,380 crore, and Axis Bank at Rs 7,164 crore, according to official disclosures and management statements.

Also read: Adani group stocks to buy: Adani Ports, Ambuja Cements shares have up to 35% upside potential, suggests ICICIdirect

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