Adani Enterprises’ ability to service debt improves

Mumbai: Adani Group flagship company Adani Enterprises Ltd’s (AEL) ability to service its debt obligations has improved significantly as of March 31, 2023, compared to last year as borrowings have come down while earnings have gone up.

The company’s interest service coverage ratio, a measure of its operating profit versus its interest costs, has improved to 3.09 at the end of FY23 compared with 2.41 a year ago, as per the company’s own calculations.

This, after the company’s gross debt came down by 7% to ₹38,320 crore, of which ₹10,544 crore is founder’s debt while the rest is external debt.

Earnings before interest, tax, depreciation and amortisation (ebitda) more than doubled year-on-year to ₹10,025 crore, data from the company’s investor presentation show.

The company’s cash position, including bank balances, has improved to ₹5,374 crore, 37% higher than a year earlier.

“Our focus on maintaining credit quality of AEL is demonstrated in these financial numbers,” said Jugeshinder Singh, CFO of Adani Group, during a post-earnings investor call.

“As a result, our net debt-to-ebitda ratio has more than halved to 2.2 times from 5.2 times during the last year,” he said.

Fallout of US Short-seller’s Report
The focus on the Adani Group’s debt profile has increased since a US-based short-seller published a report alleging rampant fraud and stock manipulation at the ports-to-cooking oil conglomerate. The Adani Group has denied any wrongdoing.

Stock prices of listed Adani Group companies nosedived and yields on its bonds surged after the publication of the report, hurting investor and lender confidence, and making it difficult for the group to borrow fresh capital. The development halted the aggressive pace at which it was expanding.

While the company’s gross debt has come down, its finance cost for the March quarter has almost tripled to Rs 1,525 crore. Singh attributed this to a write-off of a lease cost related to a rail line in Australia and the continuing capital expenditure programme in the airports business.

The company has also moved some of its short-term debt related to airports and Australian projects to long term, Singh said. With this, AEL’s short-term gross debt as of March 31 went down to Rs 4,244 crore compared with Rs 19,372 crore a year ago.

Long-term gross debt stood at Rs 34,076 crore against Rs 21,652 crore a year earlier.

Adani Enterprises incubates new businesses for the Adani Group, and presently houses varied businesses such as mining, resources trading, airports, road construction, renewable energy and data centres, among others.

A bulk of the debt is on account of the airports business. The conglomerate has eight airports in its portfolio, including Mumbai, Ahmedabad, Jaipur and Lucknow.

“Adani Enterprises has a lot of runway. It is unfortunate that we had to go through this politicised, malicious report,” Singh said in the investor call. “The group has been on a deleveraging trend since 2015-16. It has been going on for eight years and it is continuing.”