'We Have Rs 31,650 Crore In Cash Reserves,' Adani Group Reassures Investors Of Strong Financial Health

It's been three weeks since the Hindenburg research report came out and rattled Gautam Adani's and Adani Group¡¯s stocks. The market value of the embattled conglomerate's companies has plummeted to Rs 10 lakh crore.

Amidst the bloodbath in its stocks, Adani Group has been taking steps towards damage control as Hindenburg Research's impact continues to hurt the conglomerate.

Adani Group Issues Statement

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Adani Group issued a statement on Tuesday to reassure the conglomerate's strong financial health, in addition to hiring US-based accounting firm Grant Thornton as auditor this week.

Adani Group said it has adequate cash reserves and its listed companies are able to refinance their debts, in a credit report aimed at reassuring investors after last month¡¯s critical investigation by US short-seller Hindenburg Research.

Adani Group¡¯s gross debt stood at Rs 2.26 trillion ($27.3 billion) at the end of September, and that amount is forecast to remain steady through the end of March, according to the group¡¯s release on Tuesday. The figure broadly matches the tally cited by the company¡¯s chief financial officer at the end of January, as per a Bloomberg report.

Adani Group¡¯s cash balances increased to Rs 316.5 billion (Rs 31,650 crore) in December from Rs 297.5 billion at the end of September, it said.

¡°Our businesses operate on long-term annuity contracts generating assured and consistent cash flows with no market risk,¡± the company said in the credit report.

Also Read: Meet Nathan Anderson, The Man Behind Hindenburg Report

Adani Group's Financial Health Under Scrutiny

The financial health of the Adani Group has been under intense scrutiny since Hindenburg Research accused it of inflating revenues and manipulating stock prices. Some of the group¡¯s bonds dropped to distressed levels, while more than $125 billion has been wiped from its stock market value since Hindenburg Research came out with its report on January 24, 2023.

More than 81% of the earnings before interest, tax, depreciation, and amortisation of Adani Group companies came from infrastructure businesses, which generate a steady cash flow, the report showed. Based on a current portfolio of assets worth more than Rs 3.7 trillion, it stands to generate earnings of more than Rs 600 billion, according to the document. Financing is a "conservative" mix of debt and equity, it said.

Concerns For Adani Group

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Prior to Tuesday¡¯s statement by Adani Group, Moody¡¯s Investors Service cited concerns about Adani¡¯s ability to raise capital or refinance maturing debt in the coming years, as per a Bloomberg report.

S&P Global Ratings, too, has cut the rating outlook for Adani Ports and Special Economic Zone Ltd. and Adani Electricity Mumbai Ltd. to negative from stable. ¡°There is a risk that investor concerns about the (Adani) group¡¯s governance and disclosures are larger than we have currently factored into our ratings,¡± it said.

This isn¡¯t the first time the debt load of Adani¡¯s firms has faced scrutiny. In August, CreditSights, a Fitch Group unit, described the conglomerate ¡ª whose businesses span ports to electricity ¡ª as "deeply overleveraged."

Adani Group rebutted the CreditSights assessment, while it has repeatedly denied Hindenburg¡¯s allegations, called them baseless, and threatened legal action as well.

The concerns about the group¡¯s debts were propelled back into the global spotlight by Hindenburg, and the ensuing market rout prompted the group to scrap its planned stock offering. The fallout risks having wider implications for India, given Adani¡¯s links to Prime Minister Narendra Modi¡¯s infrastructure plans and Hindenburg¡¯s allegations that the group escaped proper scrutiny, as per the report.

Adani's Prepayment Plans To Boost Investor Confidence

Adan Group has already prepaid loans worth $1.11 billion to release pledged shares and promised to lower leverage in the coming months. Adani Port has also reportedly announced plans to repay loans worth up to Rs 5,000 crore in the fiscal year beginning April 2023, while the Adani Group has announced plans to prepay a $500 million bridge loan due next month.

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