Judging by the stock market, Adani’s moves have been wildly successful.
Shares in some of his companies have climbed more than 1,000 per cent since 2020. That compares with a 44 per cent advance for the nation’s benchmark S&P BSE Sensex Index.
Adani Group shares climbed on Tuesday (Sep 6), with Adani Total Gas and Adani Enterprises up more than 2 per cent.
The sharp gains, particularly as global financial markets waver in the face of higher interest rates, have added to existing worries over opaque shareholder structures and a lack of analyst coverage. By contrast, the dollar bonds for many of the group’s companies have tumbled.
“You don’t know how his market is rising so sharply because there doesn’t seem to be much institutional investor interest,” said Hemindra Hazari, an independent research analyst based in Mumbai.
The CreditSights analysts who warned about the excessive debt levels of Adani’s firms said the founders, known as “promoters” in India, need to inject more equity capital into the companies to reduce leverage on their balance sheets.
They also expressed concern that entering new, unrelated businesses that are capital intensive raises its own set of risks.
The Adani Group responded by saying it has improved its debt metrics over the past decade, with the leverage ratios of its portfolio companies now “healthy” and in line with their respective industries.
Net debt has dropped to 3.2 times earnings before interest, taxes, depreciation and amortisation from 7.6 times in 2013, the group said.
At the same time, stakes pledged for loans have slid from highs in 2020, when a COVID-fuelled stock rout pushed Adani and his family to increase collateral.
Despite the skepticism, CreditSights said it drew “comfort” from the group’s strong relationships with banks as well as the administration of Modi, who won re-election in 2019 with almost two-thirds of the votes.
Sharon Chen, a Bloomberg Intelligence analyst who covers Adani’s ports and utilities units, said she is not concerned by the level of leverage and does not expect any funding issues.
“He’s not only on an acquisition spree and banks are willing to fund him,” but he has close ties to Modi, Hazari said. “As long as this government lasts – and it is expected to last quite a long time – the music will continue.”