Investors Still Have Doubts About Adani Group’s Longer-Term Repayment Abilities Even As $153 Billion Stock Rout Eases

Investors Still Have Doubts About Adani Group’s Longer-Term Repayment Abilities Even As $153 Billion Stock Rout Eases

The meltdown of Gautam Adani-led Adani Group stocks has shown signs of abating after the conglomerate went on a tour to restore confidence and won a $1.9 billion investment from a high-profile money manager, according to a report by news agency by Bloomberg. However, a closer look at Adani’s empire reveals while fears of a debt blow-up in the next three years have receded, investors still have doubts about the group’s longer-term repayment abilities.

According to the report, the ports-to-power conglomerate’s market slump and uncertainties over credit ratings continue to fan worries about its access to funds after US-based short seller Hindenburg’s fraud charges.

These concerns have lingered even after Adani Group renewed efforts to appease investors during a three-day roadshow this week in Singapore and Hong Kong, where executives said the company has enough money to repay debt due over the next three years.

A family trust also sold Rs 154.5 billion ($1.9 billion) of stock in four companies to GQG Partners on Thursday. “It’s certainly positive he’s managing to sell some of his holdings and raise some cash,” said Kamil Dimmich of North of South Capital. “If we can see that engine resume where he can access financial markets again, that could stabilise things,” he said.

Adani Group has also cut expenses and made early debt repayment to alleviate a rout that has erased $153 billion from its stocks since US-based Hindenburg Research’s fraud allegations, which it has denied. The following indicators will likely prove key to money managers’ decisions on the conglomerate, as its crisis of confidence continues to unfold.

While most of Adani Group’s 15 dollar bonds are off their lows hit right after Hindenburg’s January 24 report, all but one are still in the red.

The group’s four notes due by the end of 2026 are trading between 84 cents to 94 cents on the dollar, down from 91 cents to 99 cents before the report, but still indicating relatively low-payment risk.

It’s a different picture for bonds with maturities further down the road. Seven of the group’s 11 notes due in or after 2027 are trading below or near 70 cents on the dollar, a level that defines distress or severe concerns about timely payment.

After a rout that had erased almost two-thirds of their combined market value, the group’s 10 stocks staged a collective rebound Wednesday for the first time since Hindenburg’s report, led by a near 15 per cent surge in flagship Adani Enterprises Ltd.

The latest gains have helped cut the conglomerate’s market wipe-out to about $140 billion from a peak of $153 billion. But, it’s still early days. Adani Total Gas Ltd, Adani Transmission, and Adani Green Energy Ltd., which racked up the biggest losses, remain 70 per cent to 80 per cent lower from their January 24 levels. Hindenburg said in its report that Adani’s seven key namesake stocks had sky-high valuations and faced downside of 85 per cent.

Moody’s Investors Service, which cut its outlook for Adani Green and three other group firms to negative from stable last month, said that refinancing maturing debt, changes to capital-spending plans, and capital-raising efforts are key variables to watch. Also ratings actions could follow if the firms’ ability to raise capital is significantly curtailed, there is a significant increase in borrowing costs or deterioration of fundamentals.

S&P Global Ratings also downgraded Adani Group’s outlook to negative in February. It said that Indian banks will likely charge higher risk premiums and become extra cautious in the aftermath of the crisis.

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