Probe in US, protests in Australia: Global ambitions weigh on Adani Group

Indian conglomerate's rising international footprint has come with controversies

An investigation in the United States, rating action by international agencies and cancelled deals in Kenya are some issues facing India’s Adani Group – troubles that have come with the conglomerate’s increased global exposure in recent years.

 

Key group companies’ share of business from outside India has increased, according to data compiled by Business Standard from company disclosures. Adani Power’s share of business from non-domestic sources rose from zero per cent in financial year 2018-19 (FY19) to 14.6 per cent in FY24 after a power supply deal with Bangladesh. There have been similar increases for Adani Ports and Special Economic Zone (4.1 per cent to 11.9 per cent) as the company struck deals with Israel, Sri Lanka, Australia and Tanzania. Adani Enterprises’ operations in Indonesia and elsewhere have taken the share of the company’s international revenues from 30.1 per cent in FY19 to 35.2 per cent in FY24.

 

A statement by the group on November 25 said 42 per cent of its debt comes from Indian banking. Around 27 per cent is from global banks while another 23 per cent is from global capital markets. The remainder is said to be from the domestic capital market and other sources.

 

Some group companies have seen a decline in operating profits and others continue to see double-digit growth. 

 

Operating profits have trended higher than interest obligations for most companies. Adani Power and Adani Energy Solutions have been laggards. The group’s cement portfolio has seen a slowdown though drawing comparisons is complicated due to mergers and acquisitions. The statement suggested that the weighted average cost of debt capital for the group is down from 10.26 per cent in FY19 to 8.18 per cent as in September. Lower cost of capital may cushion the immediate impact of any slowdown. Most Adani Group firms generated sufficient operating profits to meet interest obligations. 

 

The medium-term impact of the recent headwinds could be on expansion plans. Many companies have battled controversies, such as disputes in Bangladesh over Adani Power’s pricing, protests in Australia over Adani Enterprises' mining plans and allegations of securities market manipulation by short-seller Hindenburg Research. The group has denied wrongdoing. But issues over funding may have an effect on capacity addition. Most group companies had been adding fixed assets through organic and inorganic routes at a significant pace even as overall private sector capex recovery for Indian companies remained uncertain.   

Global banks were reportedly considering temporarily halting new loans, and the group scrapped a $600 million bond issuance after US government charges.