MUMBAI: Adani Group’s financial flexibility may be affected temporarily as financial institutions assess how the ongoing situation influences the group’s creditworthiness.
The leading rating agency, ICRA, has highlighted potential near-term risks to the financial flexibility of the Adani Group as it evaluates the broader impact of recent events on the group’s credit profile.
However, it remains a fact that the group’s liquidity remains strong, with robust cash balance of approximately Rs53,000 crore as of September 2024. This, along with strong cash flows from existing operations, should allow the Group to comfortably meet its near-term debt servicing obligations.
EBIDTA comfortable
The Group has disclosed that nearly 70 per cent of its earnings before interest, taxes, depreciation and amortization (EBITDA) generation is secured through contracted agreements, which significantly reduces the risk of downside fluctuations.
As of September 30, 2024, the total debt of the Adani Group, excluding lease liabilities and inter-corporate deposits but including holding company (Holdco) debt for Adani Cement Ltd stood at approximately Rs2.6 lakh crore.
The group’s liquidity provides coverage for roughly 20 per cent of this total debt, which offers some immediate financial buffer.
Debt maturity
Adani Group has largely met its immediate refinancing requirements, according to informed sources. The Group has successfully addressed upcoming refinancing needs, reducing the likelihood of any major risks arising from this area.
“The average maturity of the Group’s debt, sourced from foreign banks and foreign capital markets, is 4.4 years and 8.5 years, respectively, with foreign bank borrowings accounting for 27 per cent of the total debt and foreign market borrowings comprising 23 per cent. This maturity profile provides some stability in the medium to long term,” ICRA noted.
However, if the ongoing issues facing the Group persist or lead to adverse regulatory or judicial actions, the Group’s financial flexibility could be further impacted, according to experts. In such a scenario, the Group may face heightened challenges in accessing both domestic and international capital markets.
Acces to capital market
The group may face risk on access to international and domestic capital markets and banking channels; changes in debt pricing and tightening of debt covenants; potential recall or acceleration of debt facilities; Group’s overall leverage levels; refinancing needs and progress on ongoing capital expenditure (capex) projects.,
While the Group remains in a relatively strong liquidity position in the short term, the financial flexibility of the Group, especially in light of the evolving risks raises conerns. The Group’s access to capital markets and the management of its debt will be critical in maintaining its financial stability moving forward.
