CreditSights' note entitles Adani Group as ‘deeply overleveraged'

23 Aug 2022 , 02:44 PM

CreditSights termed billionaire Gautam Adani-led Adani Group as “seriously overleveraged” in a credit note.

The fierce struggle for market supremacy between the Adani Group and Mukesh Ambani’s Reliance Industries might lead to rash financial choices, stated the note.

“We believe that many group firms need equity capital infusions to limit their excessive levels of leverage. Despite the promoter’s enormous net worth, it is impossible to determine the extent to which the promoter would be able to give continuous liquidity support, ” outlined the report.

Emphasizing on strong relationships with banks and bondholders, the note further stated that “owing to its reputation both with bank lenders and in the domestic market, and varied asset base in robust infrastructure industries, we perceive a few mitigating factors to the credit issues identified.”

The note read further that “Currently, the promoter family has promised just minor holdings in the six named firms. This allows them to offer their residual ownership as security if they need to acquire financing or provide liquidity support to a subsidiary in need of cash.”

In the worst-case scenario, Adani’s debt-financed development ambitions might eventually spiral into a major debt trap, but the firm maintains its ‘market perform’ ratings on the two Adani credit lines it covers and concluded that they ‘remain cautiously watchful’.

CreditSights is a different and independent company from Fitch Ratings, despite the fact that both firms are under the ownership of the same parent.