Richest Indian Gautam Adani’s group, which has grown on acquisitions, has pretty strong fundamentals however debt-funded future acquisitions can begin placing strain on scores, S&P Global Ratings stated on Thursday.
Starting out as a commodities dealer in 1988, the Adani group has diversified from mines, ports and energy vegetation into airports, knowledge centres and defence.
It lately forayed into the cement sector with a USD 10.5 billion acquisition of Holcim’s India items and can also be seeking to arrange an aluminium manufacturing facility. Most of this growth has been funded by debt.
S&P Global Ratings Senior Director (Infrastructure Ratings) Abhishek Dangra stated the expansion ambitions for many of the group entities are pretty excessive they usually have additionally grown via acquisitions throughout a number of entities.
“If you have a look at the rated entities (of Adani group), like Adani Ports, their enterprise elementary is pretty strong. Port enterprise is producing wholesome money flows.
Where, in all probability, the danger may lie for the group is, among the acquisitions it’s doing. Some of the current acquisitions that we’re seeing are largely debt-funded and that’s taking away the headroom,” Dangra stated at a webinar.
He stated any future acquisition that the group does on the present tempo can begin placing strain on its scores.
“Currently we see that the risks can be managed if the group manages the growth ambitions or the fundings,” he stated, including that the expansion that the Group is doing in different enterprise segments doesn’t essentially have a direct impression on the scores proper now.
“…The domestic banking system, as well as some international capital bond market investors, do look at Adani Group entities as a group and many of them, because the group has been raising funds for growth, are looking at a certain kind of group limit or limiting their exposure to one group which can become a challenge at a time when the group continues to keep growing capacity,” Dangra stated.
He stated the group is rising in a number of segments, a few of that are unrated, like cement, knowledge warehousing and airports.
“If you look at the group as a whole, promoter control on all entities is significant and growth ambition is fairly high,” Dangra stated, replying to a query on S&P’s views on leverage within the Adani group.
On Tuesday, an Adani group firm AMG Media Networks Ltd purchased 100 per cent of the fairness stakes in Vishvapradhan Commercial Pvt Ltd (VCPL) for Rs 114 crore. This acquisition additionally offers Adani group a 29.18 per cent stake in NDTV.
Subsequently, the group additionally made an open supply to purchase one other 26 per cent stake within the information channel firm for Rs 493 crore.
On the identical day, a Fitch Group unit CreditSights had flagged considerations over the group predominantly utilizing debt to speculate aggressively throughout current in addition to new companies, and stated that the conglomerate is “deeply overleveraged”.