S&P Global Ratings expects the debt-funded acquisition to put pressure on the conglomerate of India’s richest man, Gautam Adani. Adani Group has pretty solid fundamentals on the back of acquisitions across multiple entities, however, S&P believes any future acquisitions at the current pace could put pressure on its rating. Recently, Fitch Group-backed CreditSights said, the Adani Group has huge profits and is likely to fall into a debt trap.
In a webinar, Abhishek Dangra, Senior Director (Infrastructure Ratings), S&P Global Ratings said, “If you look at rated entities (of Adani Group) like Adani Ports, their business is fundamentally solid. Port business healthy cash flow Where, perhaps, the risk to the group may lie, some acquisitions it is doing. Some of the recent acquisitions that we are seeing are largely debt-funded and that is taking away the headroom is,” as reported by PTI.
Dangra believes that any future acquisitions will be Adani Group At the current pace, it may start putting pressure on its ratings. However, he added that at present, the risks can be managed if the group manages to have growth ambitions or funding.
Furthermore, Dangra said in the report, “The domestic banking system, as well as some international capital bond market investors, view the entities of the Adani Group as a group and many of them, as the group is raising funds for development, are looking to limit their exposure to a certain type of group limit or to a group which can become a challenge as the group continues to grow its capacity.” He said the group is investing in various segments, some of which are unrated, such as cement, data warehousing and airports.
recently, adani The group has received SEBI nod to acquire Switzerland-based Holcim’s entire stake in two of India’s leading cement companies – Ambuja Cements and ACC.
Holcim through its subsidiaries holds 63.19% in Ambuja Cements and 54.53% in ACC (of which 50.05% is through Ambuja Cements). Holcim’s stake and open offer for Ambuja Cements and ACC is valued at approximately $10.5 billion, making it the largest acquisition by Adani to date, and India’s largest M& A is a transaction.
Adani Group may soon launch an open offer to acquire 26% stake in ACC and Ambuja Cements. If Fully Subscribed, Adani Will Pay Approx 31,000 crore under open offer.
Earlier this week, Creditsites said in its report that Adani Group’s aggressive expansion plan has put pressure on its credit metrics and cash flow. In a worst-case scenario, the group may fall into a debt trap and result in a default.
Fitch-Arm explained that Adani Group is increasingly venturing into new and unrelated businesses, which are highly capital-intensive and raise concerns that performance oversight may be too thin.
As on August 25, 2022, the market valuation of the listed companies of Adani Group is approx. 19.22 lakh crores – making it the most valuable group. The group has overtaken Reliance Industries whose market capitalization is approx. 17.8 lakh crore so far.
Adani has seven listed companies. These are Adani Transmission, Adani Ports, Adani Power, Adani Green Energy, Adani Total Gas, Adani Enterprises and Adani Wilmar.
As per BSE data, as of August 25, Adani Transmission is the most valuable Adani company with a market cap of over Rs. 4.14 lakh crore, followed by Adani Green Energy with a cap of approx. 3.75 lakh crore, Adani Total Gas 3.70 lakh crore, Adani Enterprises approx 3.5 lakh crore, more than Adani Ports 1.72 lakh crore, more than Adani Power 1.51 lakh crore, and with the valuation of Adani Wilmar 89,190.44 crores.
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