Billionaire Gautam Adani’s empire is not deeply overleveraged, said Fitch Group unit CreditSights on Thursday, dialing back on its previous report

Billionaire Gautam Adani’s empire is not deeply overleveraged, said Fitch Group unit CreditSights on Thursday, dialing back on its previous report which claimed that the conglomerate’s aggressive expansion plan may lead it into a debt trap. The research firm corrected its previous outlook saying that it made some errors in calculations, and that leverage ratios of its companies are healthy, according to a Bloomberg report. CreditSights correction comes a day after the conglomerate refuted the claim of being overleveraged. On Wednesday, Gautam Adani’s group cited an improved net debt to operating profit ratio and more than halving of loans from public sector banks to allay concerns about it falling into a debt trap.

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CreditSights, in a previous report, claimed that the aggressive expansion pursued by Adani group has put pressure on its credit metrics and cash flow, adding that in the worst-case scenario it may spiral into a debt trap and possibly a default. In a response to CreditSights report calling the group overleveraged, Adani group on Wednesday said that companies in the group have consistently de-leveraged, with the net debt to Ebitda ratio declining to 3.2 times from 7.6 times in the last nine years. “The businesses operate on a simple yet robust and repeatable business model focused on development and origination, operations and management and capital management plan,” said the Adani group note, PTI reported.

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Following a call with Adani conglomerate’s management, CreditSights on Thursday cited elevated leverage at one unit and for another the risk of future acquisitions hurting its credit profile. “But there was no mention of the word ‘deeply’, and the Fitch Group unit also corrected a profit and a debt figure for Adani Transmission Ltd and Adani Power Ltd respectively., as per the Bloomberg report. “These corrections did not change our investment recommendations. We are presenting this piece to reconcile our calculations with Adani Group’s presentation,” Bloomberg cited the analysts including Pramod Shenoi, as saying.

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The Adani Group comprises 7 publicly traded companies – Adani Enterprises, Adani Green Energy, Adani Ports & SEZ, Adani Transmission, Adani Total Gas, Adani Power, Adani Wilmar. It may also be noted that the National Stock Exchange of India has announced that Adani Enterprises would be included in the Nifty 50 index in place of Shree Cement from 30 September 2022. After Adani Ports, this would be the second stock from the stable of billionaire Gautam Adani to be included in the index. The inclusion of Adani Enterprises on the Nifty 50 could result in a net inflow of around $213 million for the stocks counter, while Shree Cement will see an outflow of $87 million, according to Edelweiss Securities.

https://www.financialexpress.com/industry/adani-group-not-overleveraged-fitch-unit-erred-in-calculating-debt-says-leverage-ratios-seem-healthy/2659899/