Adani Group Mentions Cash Reserves to Assuage Investors
The remarks were included in a credit report meant to reassure investors following a negative study conducted by US short-seller Hindenburg Research last month.
The troubled conglomerate owned by billionaire Gautam Adani claimed to have sufficient cash reserves and the ability to refinance the debt of its listed companies.
The remarks were included in a credit report meant to reassure investors following a negative study conducted by US short-seller Hindenburg Research last month. Since a rise in Adani debt yields following the Hindenburg report would make refinancing prohibitively expensive, scrutiny of group companies’ financial positions has increased as they pay down debt.
At the end of September, the gross debt of the Adani Group was 2.26 trillion rupees ($27.3 billion), and as of the end of March, the group expects that amount to remain constant. At the end of January, the company’s chief financial officer provided a figure that was mostly consistent with that figure.
According to the group, its cash balances climbed from 297.5 billion rupees at the end of September to 316.5 billion rupees in December.
The company stated in the credit report that “Our operations run-on long-term annuity contracts delivering assured and constant cash flows with no market risk.”
Accounting Metrics
After Hindenburg charged Adani’s empire with fabricating revenues and manipulating stock prices, its financial standing is under close examination.
Even if the majority of Adani notes increased slightly on Wednesday, many of the securities are still marked as distressed or close to it. Since the short seller’s probe became public, its stock market value has lost more than $125 billion.
The yield on an Adani Green Energy Ltd. bond soared above 36% earlier this month and was last reported at approximately 25%. This is a sign of how expensive any attempt at debt financing for group companies may now be.
The analysis found that infrastructure operations, which produce a continuous cash flow, accounted for more than 81% of the Adani Group firms’ earnings before interest, tax, depreciation, and amortisation. According to the statement, it is expected to generate earnings of more than 600 billion rupees based on a present portfolio of assets worth more than 3.7 trillion rupees. It claimed that the financing is a “conservative” balance of debt and equity.
Claims Made by Hindenburg
In a report published on January 24, US-based Hindenburg Research accused the Adani Group of stock manipulation and accounting fraud, both of which the Indian company rejects.
Prior to the publication of the assessment on Tuesday, Moody’s Investors Service expressed doubts regarding Adani’s capacity to generate financing or restructure maturing debt in the years to come.
Adani Ports and Special Economic Zone Ltd. and Adani Electricity Mumbai Ltd. now have a negative rating outlook instead of a stable one, according to S&P Global Ratings. It stated that there was a chance that investor worries about the group’s disclosures and governance were greater than what was currently taken into account in its ratings.
Adani Group stated in its report on Tuesday that the fact that all three main credit rating agencies kept their ratings on Adani’s companies intact “signifies the underlying credit quality with acceptable financial profile.”
The debt loads of Adani’s companies have already come under investigation. A division of Fitch Group called the company, whose activities range from ports to power, “seriously overleveraged” in August.
While disputing the CreditSights evaluation, Adani Group has consistently refuted Hindenburg’s claims and made legal threats.
Hindenburg brought the business’s debt issues back into the public eye, and the resulting market crash forced the group to abandon its planned stock offering. Given Adani’s connections to Prime Minister Narendra Modi’s development initiatives and Hindenburg’s claims the group missed sufficient investigation, the impact may have larger repercussions for India.
The founders of Adani and their companies have paid off debts totaling $1.11 billion to free pledged shares and made a commitment to reduce leverage in the upcoming months. While the conglomerate intends to prepay a $500 million bridge loan due next month, the ports unit has revealed intentions to pay back some debt in the year beginning in April.