Adani’s Debt: How much does he owe Indian banks and is it cautionary ?

Adani Group's debt do not pose a risk to Indian banks according to reports by brokerages Jeffries and CSLA. Global brokerage firm CSLA in its report said that bank fund to the overall Adani group debt is less than 40 per cent. It said that bonds financial institutions and foreign banks form a larger part of it. While, Jefferies said that Indian banks' exposure to the Adani Group is within 'manageable limits.'

This comes at a times when the Adani Group is under fire as US short-seller Hindenburg Research said it held short positions in Gautam Adani led company, accusing it of improper use of offshore tax havens and flagging concerns about high debt that sent the Group stocks to crash.

Even though  Adani Group's debt levels doubled from ₹1 lakh crore to ₹2 lakh crore in the past three years, the overall bank debt increased by more than 25 percent, said CSLA. The Indian banks exposure to the debt is less than 40 per cent and that of private banks is less than 10 per cent.

“Indian banking exposure is less than 40 percent of total group debt. Within this, private banks’ exposure is below 10 percent of total group debt and most banks (including ICICI/Axis) have indicated that they have largely financed assets with strong cashflows, such as airports/ports,” said CSLA.

PSU banks do have material exposure (30 percent of group debt) but this debt has not increased in the past three years. Most of the incremental funding to the group for new businesses and acquisitions has come via overseas sources, said CLSA.

"The ballpark exposure of private banks is 0.3 percent of FY24 loans and 1.5 percent of FY24 net-worth. For PSU banks, the exposure is 0.7 percent of FY24 loans and 6 percent of FY24 net-worth," said CLSA.

The share of bank debt in overall group debt has reduced materially and incrementally banks have only lent ₹15000 crore, or 15 percent of the ₹1 lakh crore the group companies have borrowed over the past three years, said CLSA.

Large acquisitions, such as those of cement firms ACC and Ambuja, have been fully funded by foreign banks.

Indian banks' exposure to the Adani Group is within manageable limits, said global brokerage Jefferies.

“Following recent concerns, Adani Group has shared details of debit & leverage levels. Consolidated debt is at ₹1.6 tn (ex shareholder sub-debt) & Debt/Ebitda is down from 4.3x in FY16 to 3.2x in FY22. Acquisition of cement business may add c. ₹600 bn to debt, but also lift cashflow. Diversification of borrowing-mix, has cut share of Indian banks to 33% of debt & 0.5% of sector loans; rest with bonds/foreign banks. We watch for progress, but see low risks for banks," the note stated.

Adani's group's debt accounts for 0.5 per cent of total loans across the Indian banking sector. For public sector banks (PSU), the debt is at 0.7 per cent of total loans and for private banks, it is at 0.3 per cent.

"Adani group has a consolidated gross debt of ₹1.9 tn and net debt of ₹1.6 tn, which is spread across group companies. The top-3 companies by net debt levels are Adani Green Energy (AGEL), Adani Power (APL) and Adani Ports and SEZ (APSEZ) with ₹300-400 bn in net debt each. We understand with the acquisition of cement business of ₹600 bn (including preferential allotment of Rs200bn), but this company also generates reasonable cashflow. Over FY16-22, we estimate that net debt levels have risen from ₹0.7 tn to ₹1.6 tn reflecting capex in group companies," the note highlighted.

In a tweet by Indian Banks have an Intrinsic Compounding, it said that Indian banks have an exposure of ₹38,000 core which makes up 38 per cent of the group's debt. It is 6 per cent of PSU banks networth and 1.4 per cent of network of private sector.

Leading public sector banks said on Friday their exposure to the Adani Group was within the limits prescribed by Reserve Bank of India.

RBI allows for no more than 25% of a bank's available eligible capital base to be exposed to any one group of connected companies.

"There is nothing alarming about our Adani exposure and we don't have any concerns as of now," Dinesh Kumar Khara, chairman of country's largest lender State Bank of India, told Reuters.

An official at state-run Bank of India added that the lender's loans to the Adani group were within permissible limits, while executives at two other private lenders said that they were not yet in "panic mode" but being watchful.

"Our exposure to the Adani Group is below the large exposure framework of the Reserve Bank of India," an executive at the Bank of India said on conditions of anonymity as the details were private.