Highlights of Loan Prepayment Planning:
- Adani Group is pre-paying a significant portion of its loans against shares (LAS) portfolio worth INR 7000-8000 crore.
- The plan is to reduce the LAS exposure to zero within 30-45 days.
- The LAS portfolio includes loans from various sources such as global banks, domestic NBFCs and mutual funds.
- The funds for pre-payment are being organized by unwinding shareholder positions, availing of finance facilities and liquidating investments.
- Analysts from JP Morgan have raised concerns about promoter-level uncertainty and unknown leverage.
- Investors and rating agencies are worried about pressure on governance and requests for debt repayment.
- Adani Group plans to emphasize that Indian banking exposure is less than 40% of total debt and private banks account for less than 10%.
- Most of the group’s funding for new businesses and acquisitions has come from overseas sources, such as the acquisition debt for Holcim’s India assets.
Details of Loan Prepayment Planning:
Adani Group is taking steps to calm investor nerves by pre-paying a significant portion of its loans against shares (LAS) portfolio, estimated to be worth between INR 7000-8000 crore. The company is expected to make a formal announcement of its decision on Monday. The plan is to reduce the LAS exposure immediately and reach zero in the next 30-45 days.
This LAS portfolio is composed of loans from various sources including global banks such as Credit Suisse and JP Morgan, as well as domestic NBFCs and mutual funds. Some of these loans were due in May, while others were rolled over to September of this year or are due in January 2024.
Adani Group has reportedly organized the funds for pre-payment by unwinding existing shareholder positions, availing of strategic finance facilities, and liquidating investments. In some cases, the company may offer additional share securities if needed to address investor concerns.
An analysts from JP Morgan, Varun Ahuja and Aman Aggarwal, stated that their concerns are primarily related to promoter-level uncertainty such as the shareholder structure and unknown leverage. They estimate that based on management guidance, there is $1.8 billion in promoter-level loans, with a total of $5.2 billion in pledged stake value.
Despite recent assurances from the chiefs of State Bank of India and Life Insurance Corporation of India, investors in Adani Group companies and rating agencies are still worried about potential pressure on governance and potential requests from banks to start repaying near-term debt. To address these concerns, Adani Group plans to emphasize that Indian banking exposure is less than 40% of total group debt, with private banks accounting for less than 10%. Most of the group’s funding for new businesses and acquisitions has come from overseas sources, such as the acquisition debt taken to buy Holcim’s India assets.
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