“In a follow-up to our report outlining our credit concerns adani Group companies, we are presenting this excerpt to reconcile our calculations with the presentation of the Adani Group,” Creditsites said in a report on Thursday. “We detected computational errors in two Adani Group companies – Adani Transmission And Adani Power,
In the new note published by credit sites, qualitative profile descriptors such as ‘deep overleveraged’ have been removed.
Adani Group shares have jumped manifold in the past two years, with four listed entities rising more than ten times, helping the promoter. Gautam Adani Bloomberg ranks third in the latest global list of billionaires.
Adani Group is said to have reached out to CreditSites highlighting its systemic capital management plan, improving operating profit ratio and a diversified lending book to address rising debt concerns, ET reported on Monday.
For Adani Transmission, the global research firm corrected earnings before interest tax depreciation and amortization (EBITDA), or operating profit, is estimated at Rs 5,200 crore from Rs 4,200 crore. For Adani Power, it has lowered the gross loan estimate to Rs 48,900 crore from Rs 58,200 crore. To be sure, these reforms did not change CreditSights’ investment recommendations.
“related to Adani Green Energy (AGEL), we feel that the company’s expansion through both organic and inorganic means has elevated its leverage,” the research firm said. “The difference between management’s and our EBITDA calculations also stems from management’s inclusion of interest income.”
The Adani management said the interest income generated on various cash reserves should be added to the total EBITDA of the various Adani entities.
Such reserves include mandatory maintenance capex reserves and liquidity reserves, which Adani management said are maintained at 1.25x-1.5x of future 12-month commitments – more than the balance required for other reserves. .
“We accept management’s view that interest income typically accrues to infrastructure companies,” CreditSights said in its revised assessment.
Creditsites analysts met with Adani Group’s chief financial officer Jugeshinder Singh, better known as Robby Singh, Anupam Mishra, head of corporate finance, and Rahul Kumar, head of ratings.
The Adani management highlighted singular factors such as cash waterfall structure, run-rate EBITDA and sponsor associated debt for infrastructure lending, elements it believes investors should take into account when analyzing the group’s credit profile.
Run rate EBITDA is calculated by adding “annual EBITDA for assets commissioned since the beginning of the fiscal year” to each company’s operating EBITDA. By using run rate EBITDA to calculate the group’s leverage metrics, management believes it offers a better view of the company’s debt servicing ability.