Adani Companies Group 'Going Too High', Warns CreditSites

Gautam Adani's wealthiest group in ports-to-power-to-cement is "extremely powerful" with the group often using debt to invest heavily in new businesses, CreditSights, Fitch Group said on Tuesday.

In a report titled 'Adani Group: Deeply Overleveraged', CreditSights said, "In the worst-case scenario, an overleveraged debt growth strategy could end up in a huge debt trap, and possibly even into crisis." it is the default of one. or more than one company."

Starting as a commodity trader in the late 1980s, the Adani Group has transformed from mines, ports and power into airports, data centers and security.

Recently, it entered the cement sector with the $10.5 billion acquisition of India's Holcim division and alumina manufacturing. Much of this expansion was financed with debt.

"Over the past few years, the Adani group has pursued an aggressive expansion strategy that has strengthened its credit and investment portfolio," said CreditSights.

He added, "Adani's members are increasingly entering into new and/or unrelated businesses, which have high capital and raise concerns about expanding critical care."

While there is evidence of capital injection into group companies, the Adani Group is exposed to high governance and environmental, social and governance (ESG) risks.

"The Adani Group has a strong track record of launching strong and stable companies through its Adani Enterprises arm, and prides itself on a portfolio of stable infrastructure assets linked to the healthy performance of the Indian economy," said the report.

The Adani Group has six companies listed on the Indian stock exchange, and some of its companies have significant US dollar exposure.

Adani's six listed group companies had a total debt of ? 2,309 billion as at the end of FY22. Net worth after disbursement is ? 1,729 billion.

"In general, the group is investing heavily across both existing and new businesses, often funded through debt, resulting in higher levels of leverage," he said.

This has raised concerns about the group as a whole, CreditSights said, adding that it is carefully monitoring the expansion appetite of the group, which is being paid in a big way.

The Adani companies group is the third largest agglomerate in India, after Reliance Industries and the Tata group. It has a total market capitalization of over $200 billion.