Home / News / India /  Moody's says Indian banks' exposures to Adani 'not large enough' to affect credit quality

Indian banks' exposures to the Adani Group are not large enough to affect their credit quality materially and the overall quality of the local lenders’ corporate loans will be stable, ratings agency Moody's Investors Service said on Tuesday. 

However, it said that risks for banks can increase if Adani becomes more reliant on bank loans.

"While we estimate that the exposures are larger for public sector banks than for private sector banks, they are smaller than 1 per cent of total loans for most banks," Moody's said, adding, "Risks for banks can increase if Adani becomes more reliant on bank loans."

“We estimate that the bulk of the exposures are collateralized, either with operational assets or with projects under execution, rather than to the corporate level," it said.

The Adani Group's access to funding from international markets can be curtailed because of heightened risk perception. "Yet the overall quality of Indian banks' corporate loans will be stable," Moody's stated.

It added, "Corporates in general have deleveraged in the past few years. This is reflected in modest growth in their corporate loan books. Further, banks' underwriting has been conservative."

Moody’s report comes at a time when the group’s flagship Adani Enterprises Ltd surged, as most of the conglomerate’s stocks rose after its founders pre-paid some debt and traders covered short positions.

Earlier, Moody's has warned the share-price plunge could hit the group's ability to raise capital, while the Reserve Bank of India has started checking on lenders' exposure to it.

Adani mulls independent review

Meanwhile, the group is considering independent evaluation of issues in relation to legal compliance, related party transactions and internal controls following a US-based short-seller Hindenburg Research's critical report on its businesses, disclosures.

The Adani Group has been roiled by days of market turmoil after the US short seller's report late January alleged it had engaged in stock manipulation and used tax havens. It also said the group had unsustainable debt.

The conglomerate has denied the allegations, saying it complies with all laws and has made necessary disclosures over time. Nonetheless, investors dumped its shares as concerns of financial contagion grew. 

On Monday, Adani Group said it would pre-pay $1.11 billion of loans on shares. Separately, JPMorgan today said the group companies were still eligible for inclusion in the bank's bond indexes.

The crisis is one of the biggest reputational challenges for 60-year-old Adani, whose fortunes surged in recent years along with his stock prices, before the Hindenburg jolt. In a major setback for the billionaire, the market rout also forced him to shelve a key $2.5 billion share sale last week.

The cumulative losses of Adani group's seven listed companies still stand at $109 billion despite Adani Ports also gaining 1.4% on Tuesday and Adani Wilmar adding 5%.

Adani Green, Adani Total Gas Ltd and Adani Power, all however ended 5% lower.

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