MUMBAI: Indian billionaire Gautam Adani’s embattled conglomerate said it has adequate cash reserves and its listed companies are able to refinance their debts.
The comments came in a credit report aimed at reassuring investors after a critical investigation by US short-seller Hindenburg Research last month. Scrutiny of the cash position of group companies has intensified as they pay down borrowings, given that a spike in yields on Adani debt after the Hindenburg report would make refinancing prohibitively expensive.
Adani group’s gross debt stood at 2.26 trillion rupees ($27.3 billion) at the end of September, and that amount is forecast to remain steady through the end of March, according to the group’s release on Tuesday. The figure broadly matches the tally cited by the company’s chief financial officer at the end of January.
The group’s cash balances increased to 316.5 billion rupees in December from 297.5 billion rupees at the end of September, it said.
“Our businesses operate on long-term annuity contracts generating assured and consistent cash flows with no market risk,” the company said in the credit report.
The financial health of Adani’s empire is under intense scrutiny after Hindenburg accused it of inflating revenues and manipulating stock prices.
While most Adani notes edged up Wednesday, many of the securities are still indicated at or near distressed levels. More than $125 billion has been wiped from its stock market value since the short seller’s investigation went public.
In a sign of just how costly any attempted debt financing for group firms could now be, the yield on an Adani Green Energy Ltd. bond spiraled over 36% earlier this month, and was last indicated at about 25%.
More than 81% of the earnings before interest, tax, depreciation and amortization of Adani Group companies came from infrastructure businesses, which generate a steady cash flow, the report showed. Based on a current portfolio of assets worth more than 3.7 trillion rupees, it stands to generate earnings of more than 600 billion rupees, according to the document. Financing is a “conservative” mix of debt and equity, it said.
US-based Hindenburg Research accused the Adani group of accounting fraud and stock manipulation in a January 24 report — allegations the Indian conglomerate denies.
Prior to Tuesday’s report, Moody’s Investors Service cited concerns about Adani’s ability to raise capital or refinance maturing debt in the coming years.
S&P Global Ratings cut the rating outlook for Adani Ports and Special Economic Zone Ltd and Adani Electricity Mumbai Ltd to negative from stable. “There is a risk that investor concerns about the group’s governance and disclosures are larger than we have currently factored into our ratings,” it said.
All three major credit assessors left their ratings on Adani’s companies unchanged, something that Adani Group said “signifies the underlying credit quality with adequate financial profile,” in its report Tuesday.
