New Delhi: Adani Group has cited an improved net debt to operating profit ratio and more than halving of loans from public sector banks (PSBs) to allay concerns about it being overleveraged.
In a 15-page note, it said that companies in the group have continually de-leveraged, with the net debt to"Earnings before interest, taxes, depreciation, and amortization" (EBITDA) ratio falling from 7.6 times to 3.2 times during the previous nine years, in response to CreditSights' claim that the group was overleveraged.
The letter, saidthat "the firms operate on a simple yet solid and repeatable business model focused on development and origination, operations and management, and capital management plan."
In March 2022, the group had a net debt of Rs. 1.61 lakh crore after deducting its cash position from its gross debt of Rs. 1.88 lakh crore.
It noted that although borrowing from public sector banks made up 55 percent of the whole debt of the group companies in 2015–16, it made up 21 percent of the total debt in 2021–22.
Private banks accounted for 31 percent of loans in FY2016, but that percentage has since dropped to 11 percent. Bond financing has increased significantly from 14 percent of total loans to 50 percent now.
CreditSights, a Fitch group company, claimed last month in a study titled "Adani Organization: Seriously Overleveraged" that the ports-to-power-to-cement conglomerate is "deeply overleveraged," with the group primarily employing debt to develop aggressively across both existing and new industries.
According to the report, "in the worst-case scenario, too ambitious debt-funded expansion plans could ultimately spiral into a major debt trap, and possibly culminate in a distressed situation or default of one or more group companies."
Adani, 60, recently added airports, data centres, cement, aluminium, and city gas to his coal-to-ports empire.
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