Adani group firms' debt to equity ratio at 15-year low in H1 FY25

In post-Covid period, their net worth has grown at a faster clip than borrowing

Adani group companies in recent years have improved the combined financial ratios, led by a sharp rise in profits and a decline in the balance sheet leverage ratios.

 

The group companies’ gross debt-equity ratio declined to 1.12 at the end of September this year from 2.12 at the end of FY22. This is the lowest in at least 15 years.

 

Their combined gross debt was up 17.1 per cent year-on-year (Y-o-Y) to around Rs 2.8 trillion at the end of September this year. At the same time, their combined net worth was up 31.5 per cent Y-o-Y to around Rs 2.5 trillion.

 

In the post-Covid period, the group companies’ combined net worth has grown at a faster pace than their borrowing, leading to the balance sheet deleveraging.

 

The group companies’ gross borrowing increased at a compound annual growth rate (CAGR) of 17.1 per cent between FY21 and FY24 — from Rs 1.6 trillion to Rs 2.56 trillion.

 

In the same period, their combined net worth grew at a CAGR of 39.8 per cent from Rs 77,426 crore at the end of FY21 to Rs 2.12 trillion at the end of FY24.

 

The sharp rise in net worth in turn was driven by higher profitability across group companies. 

 

The combined net profits (adjusted for exceptional gains and losses) of the listed group companies nearly quadrupled from Rs 10,096 crore in FY21 to Rs 39,675 crore in FY24.

 

The surge came from a combination of faster revenue growth and an improvement in operating and net profit margins.

 

The group companies’ combined net sales grew at a CAGR of 30.4 per cent between FY21 and FY24 from Rs 1.3 trillion to Rs 2.89 trillion.

 

During the period, profit before interest, depreciation and tax, or operating margins, improved by nearly 200 basis points to 26.8 per cent of revenue in FY24 from 24.9 per cent in FY21.

 

Group profitability, however, worsened in the first half of FY25 in line with a poor showing by the rest of corporate India. The combined net profits of 11 listed Adani group 

 

companies were down 12.3 per cent Y-o-Y during April-September while their combined net sales were up 15.2 per cent in the period.

 

The group companies reported combined net profits of Rs 20,357 crore in H1FY25, down from Rs 23,222 crore a year ago. In the same period their net sales increased to Rs 1.55 trillion from Rs 1.34 trillion a year ago. The decline in earnings was led by Adani Power, Ambuja Cement, and Adani Energy Solutions.

 

The acquisition of Ambuja Cement and ACC in 2022 helped in deleveraging. Both these cement companies are debt-free and raised the group net worth by nearly 23 per cent in FY23 without adding anything to the group companies’ borrowing.

 

The two cement makers accounted for nearly 21 per cent of the group’s net worth in H1FY25.

 

Among other group companies, Adani Power has reported a steady decline in its debt-equity ratio from 4 in FY21 to 0.7 in H1FY25, on the back of faster growth in net profit.

 

However, Adani Enterprises, Adani Energy Solutions, and Adani Green Energy remain relatively financially stretched with the gross debt-equity ratio of 1.92, 1.86, and 6.4 at the end of September this year.

 

These three companies may need to raise equity to lower their leverage ratios and strengthen their balance sheets.