Adani Group: Debt on Adani Group is very high, pressure has increased due to aggressive expansion, risk of default on companies.
Adani Group, involved in various businesses ranging from ports to cement, has taken a lot of debt. It is being used to invest aggressively in existing and new businesses. Fitch Group arm Creditsites said in a report on Tuesday that more ambitious debt-funded development plans could turn into a bigger debt trap if the situation worsens. In such a situation, it is possible that one or more companies of the group may default.
Seven companies of the Adani Group are listed on the stock exchange. Of these, six companies had a debt of Rs 2.3 lakh crore by the end of 2021-22. Net debt after withdrawal of cash is Rs 1.73 lakh crore. These companies also have outstanding dues on US dollar bonds. “The aggressive expansion of the group has put pressure on debt and cash flow and increased risk,” the report said. This is worrying for the group.
second largest industry group
Adani is the second largest industry conglomerate in the country after the Tata group. The total market capitalization till Monday stood at Rs 19.74 lakh crore. Reliance Industries, the third largest industry conglomerate, has a market cap of Rs 17.94 lakh crore.
The group began operations in the 1980s as a commodity trader. Then ventured into areas like mines, ports, power plants, airports, data centers, defence.
It recently forayed into alumina manufacturing with cement by acquiring the Indian units of Holcim for $10.5 billion.
Strong Track Record at Risk..
The report claimed that while there is strong evidence of infusion of promoter equity capital in Adani group companies, the group also has some environmental, social and operational (ESG) risks. It added that the group has a strong track record of operating companies through Adani Enterprises. There is also a portfolio of infrastructure related to the optimal functioning of the Indian economy.
Step into a new business without experience
The report mentions the expansion of the group in areas where there is no prior experience or expertise. These include copper refining, petrochemicals, telecommunications, aluminum production. New business units that are believed to be unable to make profits for a few years usually do not have the ability to repay loans immediately.
