Synopsis: This article examines the rising debt levels of the Adani Group due to capital expenditures in airports and green energy, as well as the increased exposure of domestic banks and non-banking financial companies (NBFCs) to the group.
As of March 2024, the Adani Group's total debt stood at Rs. 2,41,394 crore, reflecting a 6% increase from the previous year.
This rise is primarily attributed to substantial capital expenditures in key business areas such as airports and green energy.
Consequently, domestic banks and non-banking financial companies (NBFCs) have significantly raised their exposure to the group, which now accounts for 36% of Adani's total debt mix.
Indian lenders, including both private and state-owned banks, along with NBFCs, have extended a total of Rs. 88,100 crore to the Adani Group, a notable increase from Rs. 70,213 crore as of March 2023.
This uptick in lending has resulted in a 500 basis point increase in exposure for these financial institutions over the fiscal year 2023-24.
Major banks like State Bank of India, Bank of Baroda, Union Bank of India, Canara Bank, HDFC Bank, Axis Bank, and ICICI Bank have all increased their lending to the group, underscoring the growing reliance on domestic funding sources.
Despite the rise in debt, the Adani Group has managed to enhance its financial position through a significant 45% increase in operating profit for the fiscal year 2023-24, reaching Rs. 82,917 crore.
This surge in profitability has enabled the group to reduce its net debt-to-operating profit ratio to 2.19 times, the lowest it has been in six years, down from 3.27 times a year earlier.
In addition to domestic debt, the group's borrowing from the domestic capital market also rose to Rs. 12,404 crore by March 2024, up from Rs. 11,562 crore a year earlier.
Meanwhile, debt from global banks saw a slight decrease to Rs. 63,296 crore as of March 2024, down from Rs. 63,781 crore the previous year.
Similarly, debt from global capital markets fell to Rs. 69,019 crore from Rs. 72,794 crore during the same period.
Looking ahead, the Adani Group is focused on achieving an operating profit of Rs. 1,00,000 crore in the current fiscal year, driven by increased cash flows from its cement, ports, green energy, airports, and solar modules businesses.
Notable expansions include a 13% increase in capacity at Adani Cement, the operational commencement of Vizhinjam and Colombo ports, and the expansion of Gangavaram and Krishnapatnam ports.
The group's green energy capacity is also set to grow to nearly 17 GW, up from around 11 GW currently, while its Navi Mumbai airport is expected to become operational this year.
In conclusion, "The Adani Group's" strategic investments in infrastructure, green energy, and airport businesses have led to a notable increase in debt levels.
However, the group's robust growth in operating profit has helped mitigate the impact of this rising debt, reflecting a focused effort to maintain financial stability while pursuing aggressive expansion plans.
Investors and stakeholders will be closely watching the group's ability to generate the targeted operating profits and manage its debt effectively in the coming years.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
