Adani group sheds ₹94,000 crore in value after a report says it’s ‘deeply over-leveraged’

• A CreditSights report on the Adani Group that called it ‘deeply over-leveraged’ sent panic waves amongst investors.
  
• Despite its warning, the research firm maintained its ‘market perform’ rating on two Adani group companies it tracks.
  
• Adani group’s overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap, in the worst case scenario, said the CreditSights report.
  
• The stocks of all Adani group companies were in the red today with Adani Green shedding the most value.
  

All the seven Adani group companies were hammered on the stock exchanges today after a CreditSights report outlined that it is ‘deeply over-leveraged’, sparking panic amongst investors.

In the first half of trading today, Adani Group companies lost over ₹94,000 crore in value, with the top loser being Adani Green.


Source: NSE

Gautam Adani’s spectacular rise to the top of India, and Asia’s richest man, is fueled by debt, the report said. Two years ago, his total wealth stood at a meagre $10 billion – in comparison to today when he is now worth $136 billion, according to Bloomberg Billionaires Index.

The report said that most of Gautam Adani’s fortunes constitute ‘paper wealth’. His spot in the top richest men list is fuelled by the value of his stock holdings.


This debt that could unravel Adani’s sprawling business empire, according to the report.

“In the worst-case scenario, overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap, and possibly culminate into a distressed situation or default of one or more group companies,” the CreditSights report said.

While this might sound gloomy, the report maintained its ‘market perform’ rating on two Adani group companies tracks – Adani Green and Adani Ports & SEZ.

The report went on to point out that the group’s competition with Reliance Industries, low equity infusion as risks, while maintaining that the Adani group can gain from the Indian government’s massive infrastructure spends.

The government has a National Infrastructure Pipeline programme worth ₹111 lakh crore sanctioned initially, expected to be spent between 2020-25.

CreditSights, which is a Fitch group company, also said that it took ‘comfort’ from the group’s strong access to diverse funding channels, and relatively stable recurring-revenue generating infrastructure assets.

Amongst the group’s biggest acquisitions is the ACC and Ambuja Cements takeover from Holcim in a deal valued at $10.5 billion (approx. ₹83,000 crore).

Every ₹1 lakh invested in Adani Group in 2020 is now worth over ₹7 lakh

While today’s rout in the Adani Group companies is big, investors who put their money in the Adani empire in 2020 have seen huge returns – every ₹1 lakh invested in the Adani Group in 2020 is now worth over ₹7 lakh, even after today’s rout.

Here are the returns of the seven Adani Group companies since the beginning of 2020:


Source: NSE | *AWL listed in 2022, ATGL listed in 2021

SEE ALSO:

Understanding Gautam Adani’s rise: a story on how to generate wealth via hope, equity and of course debt

Tatas to Ambanis, Adanis and Birlas – fortunes of these high debt companies could change after rate hikes

Gautam Adani’s overly ambitious growth plans can spiral into a massive debt trap: CreditSights report