Days after Fitch red-flagged Adani Group’s mounting debt, another rating agency S&P Global said the conglomerate’s debt-funded future acquisitions can start putting pressure on ratings of its group companies.
The rating agency, however, added that richest Asian Gautam Adani’s group, which has grown on acquisitions, has fairly solid fundamentals.
CreditSights, a subsidiary of Fitch Ratings, recently said it remains ‘cautiously watchful’ of the debt-funded expansion of Adani Group, particularly that of the listed entities.
The Adani Group in the last few years has pursued an aggressive expansion plan that has pressurised its credit metrics and cash flows, the rating agency said in its report titled, ‘Adani Group: Deeply Overleveraged’.
The Adani group has diversified from mines, ports and power plants into airports, data centres and defence. It recently forayed into the cement sector with a USD 10.5 billion acquisition of Holcim’s India units and is also looking to set up an aluminium factory. Most of this expansion has been funded by debt.
S&P Global Ratings Senior Director (Infrastructure Ratings) Abhishek Dangra said the growth ambitions for most of the group entities are fairly high and they have also grown through acquisitions across multiple entities.
“If you look at the rated entities (of Adani group), like Adani Ports, their business fundamental is fairly solid. Port business is generating healthy cash flows. Where, probably, the risk could lie for the group is, some of the acquisitions it is doing. Some of the recent acquisitions that we are seeing are largely debt-funded and that is taking away the headroom,” Dangra said at a webinar.
He said any future acquisition that the group does at the current pace can start putting pressure on its ratings. “Currently we see that the risks can be managed if the group manages the growth ambitions or the fundings,” he said, adding that the growth that the Group is doing in other business segments does not necessarily have a direct impact on the ratings right 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 said.
He said the group is growing in multiple segments, some of which are unrated, like cement, data 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 said, replying to a question on S&P’s views on leverage in the Adani group.
