Adani Group's debt crisis: How real it is
Adani Group companies are back in a pickle. The excitement surrounding GQG Partners' $1.9 billion fund infusion into the conglomerate seems to have died down. Now, it is grappling with questions related to its ability to repay debts, sliding shares and market capitalization, and more. The aftershock of the Hindenburg report refuses to leave the group alone.
Why does this story matter?
Adani stocks were on a slippery slope after a report by US-based short-seller Hindenburg Research accused the conglomerate of brazen stock manipulation and accounting fraud. The group tried to build back investor confidence by prepaying debt and doing roadshows. Its tactics seem to have worked at first, but things have gotten out of hand again, forcing the group to the drawing board.
New report questions Adani Group's debt prepayment claim
A report by The Ken questioned Adani Group's claim about repaying $2.15 billion worth of margin-linked share-backed loans. The report, however, said the conglomerate only partially repaid the loans to avoid any actions from lenders. The report also pointed out that banks have yet to release a significant chunk of pledged shares, calling it "unusual."
Adani Group shares fell after the report
The Ken's report sent Adani shares sliding on Tuesday. It was reminiscent of the state of affairs after the Hindenburg report. Adani Enterprises, the conglomerate's flagship company, fell 7%, while Adani Ports fell 5.2%. The group was quick to shut off the claims made in the report. Jugeshinder Singh, the embattled conglomerate's CFO, called the report 'misleading.'
Adani Ports and Transmission are exposed to contagion risks: Fitch
To make matters worse, credit-rating agent Fitch suggested Adani Ports and Adani Transmission have exposure to higher contagion risks and could affect financial flexibility. The rating agency pointed to issues at the governance level in both companies. According to the report, senior debts of the group's rated companies as of December 2022 are offshore and largely secured.
Adani Enterprises and Ports are trading in the green
On Tuesday, all listed companies of the Adani Group traded in the red. The group's market cap fell by nearly Rs. 49,400 crore. Things, however, seem to be looking up today. At the time of writing, shares of Adani Enterprises were up by 7.32%, while Adani Ports was trading 4.80% higher. Meanwhile, Adani Transmission's stocks were down by 1.48%.
Should we give the benefit of doubt to Adani Group?
According to Adani Group, the exchanges will update the data about its repayments after the end of this quarter. Notably, both BSE and NSE sought clarification from the conglomerate after the report. However, the benefit of the doubt should be given to the conglomerate for now, as it would not try to harm its brittle public image by making false claims about debt repayment.
