Crisil says no negative actions so far by lenders on Adani following U.S. indictment

Gautam Adani, founder and chairman of the Adani Group. File photo
| Photo Credit: Reuters

Backing embattled Adani Group, rating agency CRISIL Ratings on Friday (November 29, 2024) said the conglomerate has sufficient liquidity and operational cash flows to meet debt obligations and committed capex and that there has been no negative actions so far by lenders and investors following the US indictment of group founder chairman.

The Adani Group, which has the flexibility to reduce certain discretionary capital expenditure (capex) depending on developments in financial markets and future capital availability, has a healthy Ebitda and cash balance that reduces its dependence on external debt to sustain operations, it said in a bulletin.

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On November 20, 2024, the United States Department of Justice and the US Securities and Exchange Commission (SEC) issued an indictment and a civil complaint, respectively, in the United States District Court for the Eastern District of New York, against Gautam Adani, Sagar Adani and Vneet Jaain, key functionaries of Adani Green Energy Ltd (AGEL).

The charges relate to allegations of securities fraud, wire fraud and violation of the SEC guidelines that led to materially false and misleading statements in the bond offering documents of AGEL with respect to anti-bribery and anti-corruption policies.

“CRISIL Ratings has taken note of these developments and their likely impact on the financial flexibility of the group, including the fall in the market capitalisation of the listed companies of the group, movement in bond yields, and calling off the USD 600 million bond offering of AGEL,” the rating agency said.

The agency rates Adani group’s infrastructure and holding entities.

“These ratings are driven largely by the strength of their business and financial risk profiles. They, inter alia, factor in the steadiness of cash flows, the infrastructure nature of assets with long concession periods, and extent of cash flow cushions,” it said.

In certain cases, it also factors in the additional flexibility available to these entities through their association with, and criticality to, the larger Adani Group, which is one of the leading infrastructure groups in India.

‘Healthy Ebitda’

“The Adani Group reported a healthy Ebitda (earnings before interest, taxes, depreciation, and amortisation) of ₹82,917 crore for fiscal 2024 with a net debt-to-Ebitda ratio of 2.19 times.

“Cash balance was over ₹53,000 crore across 8 listed operating entities as of September 2024 against long-term debt maturities of ₹27,500 crore; and go-to market/construction facility of ₹8,919 crore during October-March fiscal 2025 and ₹2,137 crore during fiscal 2026,” Crisil said.

Based on management and select lender feedback, “CRISIL Ratings understands that these developments have not led to any negative actions so far by lenders/investors, such as acceleration of debt repayment or spread resets,” the agency said.

“Further, we understand the Adani Group has the flexibility to reduce certain discretionary capital expenditure (capex) depending on developments in financial markets and future capital availability,” it said adding all outstanding ratings were under continuous surveillance.

The issue at hand is sub judice and “Adani Group has sufficient liquidity and operational cash flows to meet debt obligation and committed capex plans over the medium-term,” Crisil said.

The rating agency said any adverse regulatory, judicial or government action may exacerbate the situation. “Thus, these actions will be monitored. Further, any fall-out of developments restricting the Adani Group’s access to domestic and international capital and hampering its ability to refinance upcoming bullet repayments as well as a significant increase in its cost of financing will also be key monitorables”.