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MUMBAI (Reuters) – Indian conglomerate Adani Group’s locally listed bonds have resisted the panic selling in the groups’ dollar-denominated debt and domestically listed stocks since last Wednesday following short-seller Hindenburg Research’s scathing report on the group.
Hindenburg accused the conglomerate of improper use of offshore tax havens and flagged concerns about high debt. The Adani Group has rejected the allegations, but that has not prevented its group entities’ market value tumbling by $65 billion and yields on their dollar bonds plumbing to multi-year lows.
However, transactions worth only 457 million rupees ($5.58 million) have taken place in the group’s rupee-denominated bonds in the three trading days since the report, with yields comparable to similar deals before the Hindenburg report, Refinitiv data shows.
For instance, Adani Enterprises’ bonds maturing in March 2024 were traded at a yield to maturity of 9.21% on Friday, compared with 9.05% last Wednesday.
Most of the bonds issued by the Adani group are rated AA and above, noted Venkatakrishnan Srinivasan, founder and managing partner of debt advisory firm Rockfort Fincap.
“Some of these assets are acquired at lower valuations. Hence, there is no reason for banks or other big investors to worry about their investments immediately,” Srinivasan said.
The top five Adani Group companies – Adani Power, Adani Green Energy, Adani Ports and Special Economic Zone, Adani Enterprises and Adani Transmission – have outstanding rupee bonds worth around 170 billion rupees, according to brokerage CLSA.
These companies, CLSA added, have a total debt of 2.11 trillion rupees, with 50% from banks and financial institutions and over 600 billion rupees in foreign-currency denominated bonds, which have seen a sharp selloff.
Data from CLSA Figures in
billion rupees
Company name Borrowing via Borrowing from banks,
corporate debt financial institutions
Adani Ports & SEZ 93.73 51.83
Adani Enterprises 68.41 208.27
Adani Green 6 314.26
Energy
Adani 1.11 75.52
Transmission
Adani Power 0 405.93
But, domestic banks holding this debt are not panicking as the Adani companies have enough cash flow to service the bonds, officials at these lenders said.
“We have a small exposure to Adani’s bonds but there is no concern regarding this exposure as most of it is secured,” said an official at a large state-run lender.
Bankers are not seeing an immediate risk of default, an official at a private lender said, while another state-run bank’s official said lenders would wait to see whether the markets regulator steps in.
The officials did not want to be named as they are not authorised to speak to the media.
However, Srinivasan said the Adani Group firms could find it difficult to raise fresh funds from the local bond markets until the concerns raised by Hindenburg were addressed.
Yogesh Kalinge, vice president at AK Capital Services concurred with the view.
“Going forward, investors are likely to demand higher yields for the group’s debt issuances considering the impact on investor sentiment and credit concerns arising from the report,” he said.
Moreover, Adani Group companies have not been rolling over many of their short-term commercial papers and instead allowed them to mature.
That, Kalinge said, might deter banks and mutual funds, which are not very keen to have a large exposure to short-term papers.
“While mutual funds were more comfortable prior to this event, they will likely have apprehensions in investing bulk of their holdings in short-term papers issued by the group.” ($1 = 81.9730 Indian rupees)
(This story has been refiled to correct syntax in the headline)
