 "JP Morgan sees no signs of stress across key Adani Group entities")
Global brokerage JP Morgan has assigned ‘overweight’ rating to four Adani Group bonds and has ruled out “any signs of stress” across the key listed entities of the conglomerate saying most of them have leverage less than 5 times.
The review comes on the heels of charges of bribery levelled against the group in the US. The Adani group has denied the allegations.
But the US firm has suggested that the uncertainty around international bonds seems to have been settled.
In a note, the firm rated four Adani Group bonds ‘overweight.’ Three of these bonds were issued by Adani Ports and Special Economic Zone (APSEZ) and one by Adani Electricity Mumbai. The firm said that it was ‘neutral’ on the five other bonds and ‘underweight’ on a bond issued by Adani Green Energy in its report.
The nearest repayment is of USD 290 million for APSEZ, due in January 2025.
Further, there is offshore debt repayment of about USD 300 million for Adani Cement coming up in March 2025.
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However, the firm believes that the key to watch among the bond-issuing entities is mainly Adani Green, which has a loan size of USD 1.1 billion that is also due in March 2025.
Furthermore, as per the report, in terms of the overall debt mix, most of the bond-issuing Adani entities have significant exposure to offshore debt, including bonds and loans. Adani Green has about 44 per cent exposure to offshore debt as of the end of financial year 2024 (FYE24), while APSEZ has about 82 per cent, mostly via USD bonds. The total foreign currency borrowings are about 85 per cent of the total debt.
In terms of security, APSEZ has the least share of secured debt, with about 77 per cent of the total debt as of FYE24 being unsecured, which mostly comprises the USD bonds.
Other Adani Group bonds are secured in nature and have various covenants, including a cash flow waterfall mechanism, distributions linked to graded Debt Service Coverage Ratios (DSCRs), and other debt sizing covenants, which do offer protection from cash leakage out of project companies, as per the report.
Additionally, overall, “cash flow available for distribution has been reasonably strong across the secured bond structures, given covenant compliance has not been difficult,” the report added.