The ports, power, cement, and other industries owned by the wealthiest Indian, Gautam Adani, are “seriously overleveraged,” with the group relying heavily on debt to make aggressive investments in both existing and new enterprises.
In the worst-case scenario, too ambitious debt-funded expansion ambitions might eventually spiral into a major debt trap, and possibly culminate in a distressed position or default of one or more group firms, according to CreditSights in a study titled “Adani Group: Deeply Overleveraged.”
The Adani group, which began as a commodities trader in the late 1980s, has expanded beyond mines, ports, and power plants to include airports, data centres, and defence.
Recently, it entered the alumina manufacturing industry and the cement industry by purchasing Holcim’s India operations for $10.5 billion total. This expansion was largely financed by debt.
According to CreditSights, the Adani Group has followed an aggressive expansion strategy over the past few years that has put pressure on its credit metrics and cash flows.
It said, “The Adani Group is increasingly pursuing additional and/or unrelated industries, which are very capital intensive and create concerns around diluting execution oversight.”
Feautred Image: Wikimedia commons
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