Adani Group debt: RBI asks banks to furnish exposure details; here's what Kotak Securities says

The Reserve Bank of India (RBI) has asked domestic banks for details of their exposure to Adani group companies, government and banking sources told Reuters on Thursday. The news has come amid concerns over the group’s total debt after Adani Enterprises shelved its successfully concluded Rs 20,000 crore share sale amid a turbulent market, citing the need to insulate investors from potential losses.

Notwithstanding the sharp increase in debt of Adani Group companies, bank loans to the group was largely stable over FY2019-22, said Kotak Institutional Equities said in its latest note.

"Some banks have indicated that their exposure to the group is well below their prescribed exposure limits. We note that PSU banks have seen large increase in their foreign loan book in recent quarters but a meaningful portion of the incremental loans appear to be directed towards financing the sharp increase in working capital needs of OMCs," it said.

As such, the domestic brokerage does not expect large risk to asset quality of banks, which have seen consistent improvement in recent years.

Last week, CLSA said share of bank funding in total Adani group debt was less than 40 per cent and that bonds, financial institutions and foreign banks formed a large part of the group debt.

The foreign brokerage said bank funding to the group did not materially increase in the past few years. This was even as debt of top five Adani companies has increased from Rs 1 lakh crore to Rs 2 lakh crore over the past three to four years, CLSA said.

On an absolute level, it estimated that bank debt stood at Rs 70,000-80,000 crore of the Rs 2 lakh crore debt in FY22.

"The share of bank debt in overall group debt has reduced materially and we estimate that incrementally banks have only lent Rs 15,000 crore, or 15 per cent, of the Rs 1 lakh crore the group companies have borrowed over the past three years," it said.

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