Debt-funded acquisition could put pressure on Adani Group’s ratings: S&P – Times of India

New Delhi: S&P Global Ratings on Thursday said richest Indian Gautam Adani’s conglomerate, which has grown on acquisitions, has a fairly solid infrastructure, but debt-funded future acquisitions could put pressure on the ratings. Starting out as a commodity trader in 1988, Adani Group Airports, data centers and defense have diversified from mines, ports and power plants.
It recently forayed into the cement sector with the $10.5 billion acquisition of Holcim’s Indian units and is also looking to set up an aluminum factory. Much of this expansion has been funded by loans.
Abhishek Dangra, Senior Director (Infrastructure Ratings), S&P Global Ratings, said the growth ambitions for most of the group entities are high and they have also grown through acquisitions in several entities.
“If you look at rated entities (of the Adani Group), like Adani Ports, their business is fundamentally solid enough. The port business is generating healthy cash flow. Where, perhaps, there could be a risk to the group, some acquisitions it is doing. Some of the recent acquisitions that we are seeing are largely debt-funded and this is taking away headroom,” Dangara said in a webinar.
He added that any future acquisitions that the group makes at the current pace could start putting pressure on its ratings.
“We currently see that risk can be managed if the group manages to have growth ambitions or funding,” he said, adding that the growth that the group is making in other business areas right now has a direct bearing on ratings. doesn’t have an effect. ,
“…the domestic banking system, as well as some international capital bond market investors, see Adani Group of Entities as a group and many of them, as the group is raising funds for development, are looking at a certain kind of group limit or limiting their exposure to a group which becomes a challenge at a time. This could happen when the group continues to grow capacity,” Dangra said.
He said the group is growing in several segments, some of which are unrated, such as cement, data warehousing and airports.
Responding to a question on S&P’s views on leverage in the Adani group, Dangra said, “If you look at the group as a whole, promoter control over all entities is important and the growth ambition is quite high.”
An Adani Group company on Tuesday AMG Media Network Ltd bought 100 per cent equity stake in Vishwapradhan Commercial Private Limited (VCPL) for Rs 114 crore. With this acquisition, the Adani Group has also got 29.18 per cent stake in NDTV.
The group then made an open offer to buy another 26 per cent stake in the news channel company for Rs 493 crore.
On the same day, CreditSights, a Fitch Group entity, expressed concerns over the group using debt to aggressively invest primarily in existing as well as new businesses, saying the group is “profoundly over-profit”.