Daily Management Review

To Reassure Investors, Adani Says There Will Be No Refinancing Or Liquidity Issues


To Reassure Investors, Adani Says There Will Be No Refinancing Or Liquidity Issues
In its most recent effort to reassure investors alarmed by a critical U.S. short-report seller's on its business practices, the Adani group of India said on Tuesday that neither its companies nor the near-term liquidity issues they face pose any material refinancing risk.
The group of seven listed companies headed by billionaire Gautam Adani has collectively lost about $120 billion in market value since a Hindenburg Research report on January 24 alleged improper use of offshore tax havens and stock manipulation and raised concerns about high debt.
In thorough denials of the accusations and criticisms made in the Hindenburg report, Adani dismissed the worries that its debt was unmanageable.
The apples-to-airports group claimed there was "no material refinancing risk and near-term liquidity requirement as there is no near-term significant debt maturity" in a long-awaited credit report issued by Adani to Indian exchanges on Tuesday.
At the end of the fiscal year 2023 that ends in March, Adani anticipates that the net debt of its flagship company, Adani Enterprises, will increase from 240.49 billion rupees to 258.15 billion rupees ($3.12 billion). According to estimates, the portfolio companies of the group have a net debt of 1.96 trillion rupees as opposed to 1.48 trillion rupees a year ago.
The group's debt service cover, defined as the ratio of cash flow to debt serviced during the year, is expected to be 1.87 times at the end of fiscal 2023, down from 2.03 times at the end of September.
The credit report comes amid growing market uncertainty about the company's future capital-raising plans, following Adani Enterprises' cancellation of a $2.5 billion share sale earlier this month.
The Adani crisis prompted regulatory investigations, briefly halted parliamentary proceedings, and sparked street protests by opposition parties accusing the government of favoring the conglomerate.
Indian Home Minister Amit Shah rebutted the allegations on Tuesday, saying Prime Minister Narendra Modi's party has "nothing to hide or be afraid of" in the Adani group controversy.
"The Supreme Court has taken cognisance of the matter. As a minister, if the Supreme Court is seized of the matter it is not right for me to comment," Shah, widely considered the most powerful politician in India after Modi, told the ANI news agency.
"But in this, there is nothing for the BJP to hide and nothing to be afraid of," Shah added, referring to the ruling Bharatiya Janata Party (BJP).
Rivals, including the main opposition Congress party, accuse Modi and the BJP of having longstanding ties to the Adani group dating back nearly two decades, when Modi was chief minister of Gujarat in western India. Gautam Adani and Shah are both from Gujarat.
According to approval ratings, Modi's enormous popularity appears to be intact for the time being.
On Tuesday, the Adani group received some relief when its flagship company Adani Enterprises reported a quarterly profit of 8.2 billion rupees ($99.12 million) for the December quarter, compared to a loss of 116.3 million rupees the previous year.
"Shares are reacting to the results and reversing some shorts that might have built up due to speculation," said Sameer Kalra, equity research analyst and founder of Target Investing.
Adani Power and Adani Green Energy shares fell 5% in a 1% increase in the wider Mumbai market.
Two large Adani group companies are likely to repay their short-term commercial paper (CP) debt as it comes due over the next few months, rather than rolling it over, according to two merchant bankers and a company official directly familiar with the matter.
The Economic Times of India reported on Tuesday that Adani group executives had been in talks with Abu Dhabi's International Holding Corp (IHC) for a capital infusion into Adani Enterprises or other group entities since last week.
Adani did not respond immediately to a request for comment. IHC has stated that it does not comment on market rumours or speculation.