The mega fund-raising plans of the Adani group through a combination of equity and bond offerings are likely to cost way more than anticipated in the wake of bribery allegations filed by the US Justice Department and the American securities regulator against the group.
Borrowing costs for Adani group companies are likely to increase in India and abroad with banks and investment banks planning to adopt a cautious approach on fresh funding and likely to opt for higher interest rates due to increased risks, bankers said.
Adani Enterprises Ltd (AEL) and Adani Power Ltd (APL) together approved plans to raise up to Rs 7,000 crore by way of non-convertible debentures (NCDs) and a public issue in their board meetings on October 28.
AEL and APL have approved issuing NCDs worth Rs 2,000 crore and Rs 2,500 crore each.
APL will raise an additional Rs 2,500 crore through a public issue.
The funds will help these companies pursue ambitious capex plans in sectors ranging from green hydrogen and energy storage to data centres and airports.
Adani Green Energy Ltd (AGEL) also plans to sell bonds worth $1.2 billion to finance solar-wind hybrid projects, but executives told analysts that the issue has been “rescheduled” and that they will move forward after the election in the United States in an earnings call on October 23.
“It will be smaller than $1.2 billion for sure,” Anupam Misra, head, group corporate finance, had said in reference to the dollar bond issue.
On Thursday, AGEL scrapped its plan to raise $600 million to repay debt through another dollar bond issue at a yield of 7.45 per cent, though the demand was at 7.75 per cent.
If the company is to go ahead with the bond issue, the yield will go above 8 per cent.
Adani group’s borrowing costs may rise by 150-200 basis points
While loan risk to banks for existing debt may be contained due to assets as backup, global and domestic banks may now restrict fresh funding in the near term.
Banks and financial institutions are likely to take a wait-and-watch approach and any fresh funds would likely be at higher interest rates due to the increased risks.
“In view of the bribery case in the US court, borrowing costs can rise by up to 150-200 basis points unless the case is rejected in the court,” said a banking source.
It may take at least three or four months before a review on fresh exposure is taken by banks, he said.
The State Bank of India (SBI) is the largest lender to the Adanis with an exposure of around Rs 27,000 crore.
The total debt is around Rs 2.41 lakh crore including loans and bonds.
SBI did not respond to a mail from The Indian Express.
The Adani group’s clean energy manufacturing business, including production of solar PV (photovoltaic) modules, wind turbines, and green hydrogen, is housed under its flagship AEL alongside its other verticals namely airports, coal mining, roads, and data centres.
Adani’s clean energy focus
In terms of capex, clean energy is also where AEL’s priorities lie.
In the ongoing financial year, AEL will spend roughly Rs 66,000 crore in capex, of which Rs 28,000 crore will go towards the clean energy business, according to executives.
Of the rest, Rs 16,000 crore is for airports, Rs 12,000 crore for roads, Rs 5,000 crore for data centres, and the remaining for other verticals.
In the first two quarters of FY25, AEL has spent only Rs 15,000 crore in capex on account of the monsoon period.
In January this year, the projected capex for FY25 was significantly higher at Rs 92,000 crore, 36 per cent higher than the current revised capex.
APL is expecting to spend Rs 6,000 crore in capex this year and Rs 20,000 crore in FY26 to expand its thermal generation portfolio and build its pumped storage hydropower vertical.
Adani Ports and SEZ Ltd has spent close to Rs 4,400 crore in capex over the first half of FY25.
The full year capex is expected to be around Rs 11,500 crore.
A Citigroup note said most Indian banks’ exposure to Adani group represents less than one per cent of total loans.
“If we look at the 3 group entities — Adani Green, Adani Energy, and Adani Power — we can see a combined gross debt of Rs 120,000 crore, of which Rs 40,000 crore is rupee loan from financial institutions. But considering the financial performance of these three Adani entities continues to be strong (combined trailing 12-month Ebitda (Earnings before interest, tax, depreciation and amortisation) of Rs 36,400 crore) and loans are backed by strong assets, we are not that concerned,” Bernstein said.
‘Bangladesh power plant key concern’
“The primary concern we have on PFC and REC is their exposure to the Adani Power’s Bangladesh power plant which is finding it difficult to get paid by the new govt. in Bangladesh,” Bernstein said.
The project has total outstanding borrowings from financial institutions of Rs 7,100 crore.
The saving grace is the asset can always be used to sell power in India with a new grid connection, and it is in a good location in the coal belt of India.
Adani Power at an entity level is making a lot of profit, it said.
The group will need regular access to both equity and debt markets given its large growth plans, in addition to its regular refinancing, S&P said.
“We believe domestic, as well as some international banks and bond market investors, look at Adani entities as a group, and could set group limits on their exposure. This may affect the funding of rated entities. We note that the rated entities have no immediate and lumpy debt maturities,” it said.
