 "Adani Group most attractive among Indian investment grade cos: Nomura")
Japanese global financial services provider Nomura believes that the Adani Group is the most attractive among other investment-grade (IG) corporates in India as the other corporates are comparatively expensive.
In a report, Nomura said the group’s liquidity management awareness has improved meaningfully since the Hindenburg episode in January 2023.
“While in the short term, should the Adani Group be less ambitious on their growth initiatives, we believe the group should be able to weather this round of rainstorm,” the firm added.
The firm said overall, there are no signs of stress across the group amid intact asset quality, and its debt leverage is manageable.
However, the firm believes that it is possible that the global banks might weigh halting new financing to the Adani Group after the United States Department of Justice (US DoJ) charges in the short term, but the financing should gradually resume in the long term when the dust of the Adani-DOJ saga settles. The Adani group has denied the US allegations.
“Separately, the big three Japanese banks plan to continue their relationship with the Adani Group,” the note said. The big three Japanese banks are Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corporation (SMBC), and Mizuho Bank.
Moreover, Nomura said, “The access to financing channels including capital markets, regarding the issuers which received the DoJ Foreign Corrupt Practices Act (FCPA) actions, are still there, e.g., Albemarle, Novartis, Glencore, Teva Pharmaceutical, Total.”
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Additionally, Nomura is seeing a minimal risk of termination of 8 gigawatt (GW) Solar Energy Corporation of India (SECI) solar manufacturing-linked projects.
“Tariff levels are not viewed as high for Adani Green Energy Limited (AGEL) projects, compared with ReNew’s solar SECI operational projects at average tariff of Rs 2.5 per kilowatt-hour (kWh). Any power purchase agreement (PPA) cancellation on affected projects should be able to be re-contracted via auctions with no significant downward revisions in tariff levels,” it added.
According to Nomura, the potential penalty amount regarding the US DoJ’s indictment is “manageable” given “it is up to three times the value of the bribe and we understand from Azure’s management that the size of penalty could also consider the cash flow/operating profile of the affected projects, which could indicate a smaller amount.”