CLSA in its latest note said share of bank funding in overall Adani group debt is less than 40 per cent and that bonds, financial institutions and foreign banks form a larger part of the group debt.
CLSA said bank funding to the group has not materially increased in the past few years, even as debt of top five Adani companies has increased from Rs 1 lakh crore to Rs 2 lakh crore over the past three to four years.
For study, CLSA aggregated the consolidated debt of 5 Adani group companies: Adani Enterprises, Adani Ports, Adani Power, Adani Green and Adani Transmission.
On an absolute level, it estimated that bank debt stood at Rs 70,000-80,000 crore of the Rs 2 lakh crore debt in FY22.
"The share of bank debt in overall group debt has reduced materially and we estimate that incrementally banks have only lent Rs 15,000 crore, or 15 per cent, of the Rs 1 lakh crore the group companies have borrowed over the past three years," it said.
CLSA noted that private banks’ exposure to the group is quite low at below 2 per cent of the group net worth and that the recent acquisition of Holcim assets and its financing of Rs 42,000 crore was entirely done by foreign banks.
Bank funding in the overall Adani group debt has come down from 86 per cent in FY16 to less than 40 per cent in FY22, with exposure of PSU banks falling to 25 per cent from 55 per cent and that of private banks to 8 per cent from 31 per cent five years ago.
"The key message is that Indian banking exposure is less than 40 per cent of total group debt. Within this, private banks’ exposure is below 10 per cent of total group debt and most banks(including ICICI/Axis) have indicated that they have largely financed assets with strong cashflows, such as airports/ports," CLSA said.
PSU banks do have material exposure (30 per cent of group debt), but this debt has not increased in the past three years, it said.
Most of the incremental funding to the group for new businesses and acquisitions has come via overseas sources.
"To conclude, the ballpark exposure of private banks is 0.3 per cent of FY24 loans and 1.5 per cent of FY24 net worth. For PSU banks, the exposure is 0.7 per cent of FY24 loans and 6 per cent of FY24 net worth," it said.
"Bank debt (term loans, working capital and other facilities) forms just 38 per cent of the total debt, while bonds/CP constitute 37 per cent, 11 per cent is borrowing from financial institutions and the remaining 12-13 per cent is inter-group lending," CLSA said.
CLSA said the banking exposure to Adani Group is 0.55 per cent of system loans as bank debt stands at less than 40 per cent of total group borrowing. Within this, PSU banks’ exposure as a share of their loans is 0.7 per cent, with the figures for some banks potentially at more than 1 per cent of loans, while for private banks the exposure is 0.3 per cent of loans.
"For private banks, our feedback suggests that they have potentially reduced their exposure on aggregate and the residual debt to the group is largely in very strong cashflow businesses, such as power and airports. We estimate the absolute exposure at 1.4 per cent of private banks’ FY24 net worth – any weakness due to concerns over the group’s debt would provide an opportunity to BUY, in our opinion," it said.
For PSU banks, the exposure is more meaningful at 0.6 per cent of loans and 5 per cent of FY24 net worth. PSU banks have also indicated that their exposure has not meaningfully increased in the past two to three years since the group has expanded into new businesses, CLSA said.
"Also, most of the recent acquisitions have been financing by foreign entities. One caveat is that we are not aware of non-funded exposures that PSU banks might have extended," it said.
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