This week, the World Investment Banks and Financial Services Company, Credit Suis A, has released a report on the analysis of growth of the famous Adani debt for strategic buying and investment in the country.
The richest man in India, Ka -Sut and Adani is one of the largest multinational organizations in Asia, located in all sectors, including ports, renewable energy, agriculture, energy and energy. Adani Group’s recent acquisition of India’s Holcim Limited will add nearly Rs 40,000 crore to the group’s total debt, according to a Credit Suisse analysis. The largely debt-financed purchase deal will bring Adani Group’s total debt to around 2.6 trillion rupees.
Adani Group’s total debt has increased from INR 1 trillion to INR 2.2 trillion in the last 5 years. Most of these loans were used to acquire assets and businesses in areas such as core infrastructure, airports, ports and green energy businesses. The decision to invest more in the energy and power transmission business also increased the company’s debt.
Although the group has seen an immediate rise in corporate debt levels, the shift from debt components to various instruments such as bonds, financial institutions and creditor loans is a positive sign. It is also worth noting that large volumes of these loans have long maturities, allowing the Adani Group to leverage cash flows over a period of time.
The increase in cash flow and operating income is a green signal for the group. Adani Group’s earnings before interest, tax and depreciation in the current financial year is almost 5 times. In the financial year 2016-17, this figure was 7.5x. The company’s dividend payout ratio has increased from 0.9x in FY16 to 2x in the current FY.
The Abu Dhabi-based international holding company’s recent $500 million injection into Adani Group is said to have reduced the multinational’s debt-to-equity ratio. IHC’s capital infusion is expected to reduce Adani Group’s debt-to-equity ratio from 90 percent to nearly 60 percent in March.
In the last week of August, the Ahmedabad-based company, through its Mauritius subsidiary Endeavor Trade and Investments, submitted a proposal to buy a 26% stake in Indian cement giants ACC and Ambuja Cements. ACC Limited and Ambuja Cements are the Indian subsidiaries of Holcim Limited, an international construction materials company.
Adani Group has launched an open offer after entering into a share purchase agreement with Holcim to acquire a controlling stake in Holcim’s India business. Later, the open offer, which cost the company about Rs 31,000 crore, and the share purchase agreement with Holcim worth more than Rs 45,000 crore will be financed largely through debt.
Adani Group will own 63.1% stake in Ambuja Cement after the share purchase and open purchase. ACC Limited, a subsidiary of Ambuja Cement, will be controlled by the Indian group.